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Highlights of Credit Policy

Apr 19, 2001

  1. RBI to provide adequate liquidity to meet credit growth and support revival of investment demand.

  2. RBI expects the present stable interest rate environment to continue and announces a preference for further softening during the year.

  3. Measures to reduce interest rates on export credit by 1 to 1.5 percentage points and rationalise export credit refinance.

  4. Banks are allowed to offer higher interest on deposits held by Senior Citizens.

  5. RBI to streamline its role by divesting ownership in financial institutions.

  6. Revised guidelines on exposure of banks to stock markets to be effective May 2001 after further consultations.

  7. The credit growth (non–food credit) for FY01 has registered a lower growth of 14.3% compared to 16.5% in the previous year. However, the RBI has indicated a growth of 17% in the current fiscal year.

  8. The Credit Policy is also focusing on structural changes. The setting up of Clearing Corporation is expected to impart greater transparency to debt, forex and money markets.

  9. Non-banking financial companies (financial institutions and mutual funds) will not be allowed to lend in the call money markets. Their participation will be phased out gradually.

  10. Interest on cash balances maintained with the RBI under CRR will be increased to 6% with effect from April 21, 01 from the current 4%.

  11. Setting up of 7 more debt recovery tribunals (DRTs) in FY02 as indicated in the current budget in addition to the existing 22 DRTs. The government has also proposed to bring in legislation facilitating foreclosure and enforcement of securities in case of default. This will enable banks and financial institutions to realise their dues.

  12. With immediate effect, urban co-operative banks (UCBs) are being advised not to lend directly or indirectly to individuals or corporates against security of stocks. They are also advised to unwind existing lending to stockbrokers or direct investment in shares, which were not permissible, at the earliest.


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