Reddy Reckoner

• Raised GDP growth target to 6.5-7.0 per cent from 6 per cent
• Introduces special monitoring for Systemically Important Financial Intermediaries in coordination with Sebi and Irda.

• Operationalises Liquidity adjustment facility for banks on March 29
• Introduces Market Stabilisation Scheme (MSS) to absorb liquidity arising from capital inflows.
• Aligns repayment of agricultural loans with harvesting
• Enhances external commercial borrowing limit to $500 million under the automatic route with minimum average maturity of 5 years
• Enlarges end-use of ECBs to include overseas direct investment
• Permits resident individuals to remit freely up to $25,000 per calendar year, for any current or capital account transaction or a combination of these.
• Banks allowed to issue 5-year bonds to fund infrastructure
• Banks asked to get ready to implement capital charge for market risks in preparation for Basel II
• In the mid-term review, lowers GDP growth estimate to 6-6.5 per cent following deficient rains and rising oil prices
• Raises reverse repo rate raised by 25 basis points to 4.75 per cent to contain inflation; the spread between reverse repo and repo reduced by 25 basis points to 125 basis points
• Reduces the minimum tenure of term deposits to 7 days from 15 days
• Reckons home loans up to Rs 15 lakh as priority sector lending
• Increases risk weight on home loans to 75 per cent from 50 per cent and on consumer credit -- personal loans and credit cards -- to 125 per cent from 100 per cent.
• Does away with restrictive provisions of service area approach for banks except for government sponsored programme
• Raises MSS ceiling from Rs 60,000 to Rs 80,000 crore (Rs 600 to Rs 800 billion)
• Issues instructions on "fit and proper" criteria for ownership and management in private sector banks
• Decides to place all cases of penalty imposed on banks and strictures/directions arising out of inspection in public domain
• Asks non-banking finance companies to consider phasing out their public deposits consistent with international practice

2005

• Increases reverse repo rate by 25 basis points to 5.0 per cent in the annual policy. The spread between repo and reverse repo reduced to 100 basis points
• Effective April 30, 2005, the benchmark for fixing prudential limits on commercial banks' exposure to call/notice money market linked to their capital funds
• The minimum maturity period of certificates of deposit reduced from 15 days to 7 days
• Allows cancellation and rebooking of all eligible forward contracts booked by residents, irrespective of tenor
• Allows banks to approve proposals for commodity hedging in international exchanges from their corporate customers
• Extends the closing time for inter-bank foreign exchange market by one hour to 5 pm
• Raises the ceiling on overseas investment by Indian entities in overseas joint ventures and/or wholly owned subsidiaries from 100 per cent to 200 per cent of their net worth under the automatic route
• Decides to set up an independent Banking Codes and Standards Board of India on the model of the mechanism in the UK for fair treatment of customers
• Proposes to implement Basel II from March 31, 2007, with advice to banks to adopt Standardised Approach for credit risk and Basic Indicator Approach for operational risk with effect from March 31, 2007
• Increases Reverse Repo Rate by 25 bps to 5.25 per cent, effective October 26, 2005
• Asks Indian Banks' Association to review the benchmark prime lending rate (BPLR) system and issue transparent guidelines for appropriate pricing of credit

• Constitutes Financial Markets Department with a view to moving towards functional separation between debt management and monetary operations
• Proposes to introduce intra-day short-selling in government securities

External Commercial Borrowings

• Formulates a debt restructuring mechanism for units in the SME sector
• Asks banks to make available a basic banking `no frills' account either with 'nil' or very low minimum balances as well as charges that would make such accounts accessible to vast sections of population
• Banks' aggregate capital market exposure restricted to 40 per cent of the net worth of the bank on a solo and consolidated basis; consolidated direct capital market exposure modified to 20 per cent of the bank's consolidated net worth
• General provisioning for 'standard advances' increased from 0.25 per cent to 0.40 per cent, except exposure to agricultural and SME sectors
• Decides to initiate supervisory review process with select banks having significant exposure to real estate, highly leveraged NBFCs, venture capital funds and capital markets
• Permits acquirer Urban Cooperative Bank to amortise losses taken over from the acquired UCB over a period of not more than five years

Complete coverage: The Monetary and Credit Policy 2006-2007

2006

• Increases fixed reverse repo rate by 25 basis points from 5.25 per cent to 5.50 per cent, in the third quarter review of 2005-06 policy
• Reverse Repo Rate kept unchanged at 5.5 per cent in the 2006-07 annual policy
• Raises the ceiling on interest rates on non-resident (external) rupee deposits for one to three years maturity by 25 basis points to 100 basis points above LIBOR/SWAP rates for US dollar of corresponding maturity
• Directs banks to display their offices/branches as also on their websites, the details of service charges levied on various services
• Decides to set up a working group to formulate a scheme for ensuring reasonableness of bank charges and to incorporate the same in the Fair Practices Code
• Raises general provisioning requirement on standard advances in certain sectors - personal loans, loans and advances qualifying as capital market exposures, residential housing loans beyond Rs 20 lakh and commercial real estate loans from level of 0.40 per cent to 1.0 per cent
• Risk weight on exposures to commercial real estate raised from 125 per cent to 150 per cent. Bank's total exposure to venture capital funds will form a part of its capital market exposure and banks should assign a higher risk weight of 150 per cent to these exposures
• Raises reverse repo rate by 25 basis points to 5.75 per cent in an inter-meeting action
• Raises reverse repo rate by 25 basis points to 6 per cent in the first quarter review in July