Banking Sector Update; Mid-quarter review of Monetary Policy 2010-11

Banking

Mid-quarter review of Monetary Policy 2010-11

·      RBI in its mid quarter policy review announced a permanent cut of 100bps in SLR to 24% wef Dec 18, and purchase of g-secs worth Rs480bn through OMO over the next one month

·      SLR cut to result in 3bps improvement in banks' margins, while OMO to infuse liquidity into the system easing short term interest rates

·      RBI kept other key policy rate unchanged with Repo at 6.25%, Reverse repo at 5.25% and CRR at 6.0%

·      Though rate hike on pause for now, inflationary pressures from domestic demand and higher global commodity prices to continue to guide the policy actions