RBI Announces Further Measures To Stimulate Growth

The Central Board of the Reserve Bank of India met today at Kolkata. The meeting reviewed key economic, monetary and financial developments and the various steps taken since mid-September 2008 to preserve financial stability and arrest the moderation in the growth momentum in the context of the ongoing global financial crisis and the deepening recession in major economies of the world.

In pursuance of the resolutions considered and passed by the Central Board, it has been decided to take the following further measures to stimulate growth in the Indian economy:

• In order to provide liquidity support to the housing sector, and particularly to housing finance companies (HFCs) which have been adversely affected by the recent financial market developments, it has been decided to provide a refinance facility of an amount of Rs 4,000 crore to the National Housing Bank (NHB) under the provisions of Section 17(4DD) of the Reserve Bank of India Act, 1934. This refinance will be available against the NHB's loans and advances to HFCs. The facility will be available at the prevailing repo rate under the LAF for a period of 90 days. During this 90-day period, the amount can be flexibly drawn and repaid. At the end of the 90-day period, the drawal can also be rolled over. This refinance facility will be available up to March 31, 2010. The utilisation of funds will be governed by the policy approved by the Board of the NHB.

• With a view to mitigating the pressures on account of the recent developments on loan disbursements to Indian exporting companies and for honouring disbursements under export lines of credit extended at the behest of the Government of India to overseas financial institutions, sovereign governments and other entities for financing imports from India, it has been decided to provide a refinance facility to the EXIM Bank under the provisions of Section 17(4J) of the Reserve Bank of India Act, 1934. The refinance facility will be of an amount of Rs 5,000 crore. It will be available at the prevailing repo rate under the LAF for a period of 90 days. During this 90-day period, the amount can be flexibly drawn and repaid. At the end of the 90-day period, the drawal can also be rolled over. This refinance facility will be available up to March 31, 2010. The utilisation of funds will be governed by the policy approved by the Board of the EXIM Bank.

The Reserve Bank will continue to closely monitor the developments in the global and domestic financial markets and will take swift and effective action as appropriate. The Reserve Bank will endeavour to minimise the stress on various sectors of the economy on account of the international financial crisis and the global slowdown.  The policy objective is to ensure adequate availability of liquidity in the system and to maintain conditions conducive for flow of credit for all productive purposes, particularly to the housing, export and small and medium industry sectors.

The following members were present in today’s meeting: Shri Y H Malegam, Prof U R Rao, Shri Lakshmi Chand, Shri H P Ranina, Dr Ashok Ganguly, Shri Azim Premji, Smt Shashi Rajagopalan, Shri Suresh Neotia, Dr A Vaidyanathan, Prof M M Sharma and Shri Sanjay Labroo. Dr D Subbarao, Governor, Reserve Bank of India chaired the meeting. Deputy Governors of the Reserve Bank, Dr Rakesh Mohan, Smt Shyamala Gopinath, and Smt Usha Thorat were also present.

The Central Board of Directors of the Reserve Bank meets at least once every quarter. The Board has scheduled meetings in Mumbai, Chennai and Kolkata each year. The post-budget meeting of the Board, traditionally held in New Delhi, is addressed by the Union Finance Minister. The other meetings of the Board are held in the remaining state capitals by rotation. The main function of the Central Board of the Reserve Bank is to provide overall direction to its affairs.

G. Raghuraj
Deputy General Manager

Press Release : 2008-2009/864