Third Quarter Review Of Monetary Policy 2011–12 RBI released third quarter review of the Monetary Policy for 2011-12 on January 24, 2012. Following are highlights of the policy review. Monetary Policy Cash Reserve Ratio is cut by 50 basis points from 6.0% to 5.5% with immediate effect, injecting Rs. 32,000 crore into the system. The key policy rate Repo Rate at 8.50% Reverse Repo Rate (RRR) will continue at 7.5%, and the Marginal Standing Facility rate at 9.5 % remain unchanged Macro Economy GDP growth estimate for 2011-12 cut to 7 per cent from 7.6 per cent 2012 March-end inflation projected at 7 per cent Concerns Decelerating growth caused by several factors like uncertain global environment, past monetary tightening and domestic policy uncertainties. Upside risk to inflation from global crude oil prices, the lingering impact of rupee depreciation and slippage in the fiscal deficit. Tight liquidity condition beyond the comfort zone of RBI Fiscal slippages threat to economic stability. Investment, capital inflows have slowed down Sovereign debt issues in EU RBI Guidance “The CRR reduction can also be viewed as a reinforcement of the guidance that the interest rate cycle has peaked and that future rate actions will be towards lowering the policy interest rate”, of course, subject to multiple factors that may affect future actions of RBI. - Dilip Jain (Risk Management Advisory)