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Description
The annual monetary and credit policy announced by RBI has taken adequate care for the strengthening of the economy and it considers the need for monitoring of the local and international business environment. Moreover, the policy presents a road map towards the implementation of the Basel II Capital Accords in Indian Banks and RBI has asked banks to develop their risk management systems. The corporate has welcomed the policy even though it does not have major changes.
Reserve Bank of India (RBI) announced the annual monetary and credit policy 2004 on Tuesday, May 18, 2004 and considered the emerging issues and concerns in a very comprehensive manner. RBI continued to have its outlook regarding soft and flexible interest rates following the objective of providing adequate liquidity to facilitate higher economic growth in the economy. The policy has provided a fair balance between the underlying strengths of the economy and the probability of adverse developments taking place in the external sector.
The policy has highlighted the need to keep a close watch on the local and international business environment. The policy came at a time when the oil prices were at an all-time high in the international markets and interest rates were expected to increase. The RBI has continued with its flexible interest rates regime without a particular range or a fixed target rate.
The monetary policy has identified agricultural sector as thrust areas for enhancement of growth and has taken many steps by way of concessions in credit delivery channels and higher credit flows to this particular sector. It is provided that the banks may waive margin requirements for agricultural loans up to Rs. 50,000. Concessions have been made towards NPA recognition for the agricultural sector also. The policy also has a provision that the securitized agri-loans would be treated as lending to the agriculture under the priority sector lending.
