key bank rates unchaged, RBI for greater credit to industries

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Mumbai, Jan 29 (UNI) Maintaining a status quo in key rates, the Reserve bank of India today urged financial institutions to extend more credit to employment generating industrial sectors while seeking public policy actions to safeguard capital inflows into the country.

Defying market sentiments, the RBI, relying more on the domestic determinants at macro levels, kept the bank rate at six per cent, the repo rate at 7.75 per cent, the reverse repo rate at six per cent and the Cash Reserve Ratio at 7.5 per cent unchanged while announcing the third quarter review of the annual monetary policy, RBI Governor Y Venugopala Reddy in the post review announcement press conference clarified that the Bank, recognising the possible uncertain and complex global economic situation, decided to maintain a status quo taking into account the positive fundamentals of the domestic economy which on the path of a moderated growth of 8.5 per cent.

He, however, stressed that the Bank would continue to monitor the global situation and take preventive steps, if warranted.

Dr Reddy said the policy reinforced the emphasis on price stability and well anchored inflation expectations of near five per cent and target it at four to 4.5 per cent. The Central bank had to look into the balance the supply and demand position while ensuring a monetary and interest rate environment conducive to continuation of the growth momentum and orderly conditions in financial market.

RBI reinforced the emphasis on price stablity and well anchored nflation expectations in this regard.

Batting confidently a volley of questions on why the apex bank failed to recognise the recent rate cuts in the US Federal Reserve, Dr Reddy highlighted at length the fiscal, monetary and economic conditions in the US was totally divergent when compared to that of India, the second fastest growing economy of the world.

Liquidity management would assume priority in the conduct of monetary policy through appropriate and timely action he said adding that the RBI had sought the financial institutions to enhance credit to employment oriented industrial sectors to fuel further the economic growth. He also called for positive public policy initiatives in this direction.

The Apex bank also sought active policy actions to ensure capital flows into the country through the means of stable and transparent modes.

The annual financial statement for the year 2007-08 would be announced on April 29, 2008, the RBI said.

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