Reserve Bank of India(RBI) has announced its credit policy for the fiscal year 2009-10. Credit policy is the estimation of the overall economic growth and various other sectorial growth for the impending fiscal year. The economic growth is expected to be 6% in 2009-10 and inflation could go to negative levels in the first half of the year and then gradually limp back to positive WPI infaltion levels. Consumer Price Index(CPI) which is the price levels of essential commodities like food grains,vegetables are likely to come down further and moderate through the year.
The RBI has also cut repo rate by 25 bps to 4.75% and reverse repo rate by 25 bps to 3.25%. Repo rate is the interest rate at which the RBI lends money to other banks and Reverse repo rate is the interest that the banks will get when they deposit the money in RBI. The RBI has also said that banks dont need to get license from government to open new ATM's across India.
These measures will pump lot more liquidity into the system and encourage banks to lend money to both industries and common citizen. The RBI has come down heavily on banks for not decreasing the interest rates and encoursgung money spending. The credit growth is seen to increase by another 20% and money supply by 17% in the financial year 2010.
