Bank rate unchanged; RBI sees GDP growth at 7%

The Reserve Bank of India has left the bank rate and repo rate unchanged at 6 per cent and 4.5 per cent, respectively.

Inflation for the fiscal 2004-05 has been pegged at around 5 per cent, RBI Governor Y V Reddy told bankers while presenting the biannual Monetary and Credit Policy in Mumbai on Tuesday.

• RBI's Credit Policy 2004-05: Complete Coverage

The RBI said the gross domestic product growth for 2004-05 has been pegged between 6.5 and 7 per cent.

Reddy said the price situation is unlikely to cause concern for macro-economic stability in 2004-05.

The outlook for external sector accords comfort to the conduct of public policies, he added.

The foreign exchange reserves are at comfortable levels, he said.

The RBI said despite uncertainties, India's position among the top performers globally in terms of GDP growth is expected to continue in FY-05.

As regards prices, Reddy said despite the overhang of problems on account of oil prices and large domestic liquidity, price situation is unlikely to cause concern to macro-stability during this fiscal.

While RBI would continue to provide a policy environment that avoids excessive and destabilising volatility as a public good, market participants have been asked to take into account the portfolio risks from unexpected developments and provide adequately for them, the bank said.

Reddy said inflationary situation needs to be watched closely and there should be no room for complacency on this account in view of global uncertainties and geopolitical risks.

The overall stance of the monetary policy for 2004-05 would be provision of adequate liquidity to meet credit growth and support investment and export demand while keeping a close watch on movements in price level.

Secondly, while continuing with status quo, RBI would pursue an interest rate environment that is conducive to maintaining momentum of growth and macro-economic and price stability, Reddy added.

On measures taken, he said banks are encouraged to align the pricing of credit to assessment of credit risk to improve credit delivery and credit culture.