Annual Report 2004-2005

Monetary Policy Measures

The focus of RBI's monetary policy during 2004-05 has been management of liquidity overhang and inflationary pressures, arising from domestic and international developments. The impact of these policy adjustments largely came to rest on the interest rates. Inflation was expected to be stable and the outlook was a moderate growth for the economy. Ensuring adequate credit growth to meet the requirements of the productive sector was also high on the agenda in face of the inflationary pressures. In its review in April 05, RBI increased the Repo Rate by 25 basis points to 4.75%, while leaving the Bank Rate unchanged at 6.0% though the cash reserve ratio continued to be pegged at 5.0%. RBI addressed the issue of the liquidity overhang by raising the Market Stabilization Scheme limit to Rs.80000 crore.