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The policy said so...

Balancing various factors, and assuming no further serious disruption in the world economic environment, at this stage, a projection in the range of 5.0 to 6.0 per cent growth rate in the current year may be reasonable for the purpose of credit and monet ary management. India is likely to be one of the very few countries in the world which would show a growth rate of this order in the current year.

...on present reckoning, it is expected that the current account deficit for the year 2001-02 will still be well below 2.0 per cent of GDP and no significant pressures on balance of payments are expected on this account.

Building up reserves

While all efforts will be made to maintain the current stance of monetary policy, two caveats are necessary in order to ensure that banks and market participants do not take too complacent a view on the current monetary and interest rate environment...Th e time when market conditions are favourable is also the time to build adequate reserves to guard against any possible reversal of the interest rate environment in future due to unexpected developments.

On the basis of a review of macroeconomic and monetary developments, the Bank Rate is being reduced by 0.50 percentage point from 7.0 per cent to 6.50 per cent with effect from the close of business today (October 22). At this level, it is the lowest Ba nk Rate since May 1973.

Debt issues `creditable'

A further review of non-SLR investments in the light of recent developments reveals that the ease of mobilising funds through privately-placed debt issues could lead to the use of such funds for risky purposes other than what is disclosed in the offer do cument.

In regard to bonds guaranteed explicitly or implicitly through letters of comfort, etc., mere availability of such guarantee should not determine the credit decision, and banks and FIs should undertake due diligence on the intrinsic viability and bankab ility of projects financed through issuance of such bonds. Overall, any proposal of direct or indirect financing of government budgets, directly or through SPVs should be eschewed...

What says universal banking

The salient operational and regulatory issues to be addressed by the financial institutions for conversion into a universal bank was also communicated by RBI through a circular dated April 28, 2001... The Reserve Bank welcomes the interest shown by some financial institutions in this regard.... It should, however, be recognised that the movement towards universal banking should foster stability and efficiency of the financial system, but by itself it cannot provide a viable or sustainable solution to th e operational problems of individual institutions arising from low capitalisation, high level of NPAs, large asset-liability mismatches, liquidity, etc.