RBI puts GDP growth rate at 6.5 p.c.

By Our Special Correspondent

MUMBAI, APRIL 19. The Reserve Bank of India (RBI) today said the growth rate of real Gross Domestic Product (GDP) for 2001-02 may be placed at 6 to 6.5 per cent and the rate of inflation is assumed to be within 5 per cent.

``There are uncertainties with regard to industrial growth. However, assuming revival of the industrial sector from the next quarter, a reasonable monsoon and good performance of exports, the GDP growth rate would be at 6 to 6.5 per cent,'' the RBI Governor, Dr. Bimal Jalan, said addressing a press conference here to announce the Monetary and Credit Policy for 2001-02.

The RBI Governor said the overall stance of the policy was two- fold - to provide adequate liquidity to meet credit growth and support revival of investment demand while continuing a vigil on movements in the price level. Secondly, Dr. Jalan said ``within the overall framework of imparting greater flexibility to the interest rate regime in the medium term, to continue the present stable interest rate environment with preference for softening to the extent the evolving situation warrants.''

The Reserve Bank is moving towards greater flexibility for banks in determining interest rates and at the same time tightening norms to bring operations of banks closer to International standards. ``The primary focus is to bring in structural reforms with a long term view which would result in less dependence on directions from the Reserve Bank.''

Thus, the Reserve Bank has liberalised the Prime Lending Rate (PLR) norms. ``PLR should be a benchmark rate or an indicative rate rather than a floor rate,'' he said, thus paving the way for banks to lend at even below PLR. Banks are permitted to formulate fixed deposit schemes specifically meant for senior citizens offering higher and fixed rates of interest as compared to normal deposits of any size. Interest rate on export credit has been reduced by 1 to 1.5 per cent and export credit refinance has been rationalised.

In light of the recent experience in the capital markets, the RBI tightened prudential norms for Urban Co- operative Banks (UCBs). It has also proposed to set up an apex supervisory body which could take over the entire supervisory functions of these banks. UCBs have been advised not to lend against shares and also to unwind existing lending to stock- brokers with immediate effect.

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