BANK RATE

It has been decided that with effect from the close of business of March 1, 1999, the Bank Rate

will be reduced by one percentage point from '9.0 per cent per annum' to '8.0 per cent per annum'.

As a consequence to this change, the interest rates on Special Liquidity Support and General

Refinance facility to banks and liquidity support to Primary Dealers against the security of holdings in Subsidiary General Ledger Accounts are being reduced by one percentage point. Penal interest rates on shortfalls in reserve requirements also stand revised (vide Annexure).

Annexure

Interest Rates on Advances from Reserve Bank and Penal Rates which are at present Linked to the Bank Rate

Sr.

Advances to

Existing Rates

New Rates

No.

(Effective close of

business on

March 1, 1999

(Per cent per annum)

1.

Scheduled Commercial Banks

i)

Export Credit

Bank Rate minus 2

Bank Rate minus 1

Refinance Facility

percentage points (7.0)

percentage point* (7.0)

ii)

General Refinance Facility

(a) First Four Weeks

Bank Rate (9.0)

Bank Rate (8.0)

(b) Second Four Weeks

Bank Rate plus one

Bank Rate plus 1

percentage point (10.0)

percentage point (9.0)

iii)

Special Liquidity Support Facility¹

(a) First Four Weeks

Bank Rate (9.0)

Bank Rate (8.0)

(b) Second Four Weeks

Bank Rate plus one

Bank Rate plus 1

percentage point (10.0)

percentage point (9.0)

2.

State Co-operative Banks (SCBs)

Towards general banking business such

Bank Rate plus 2.5

Bank Rate plus 2.5

as clearing adjustments, Liquidity, etc.

percentage points (11.5)

percentage points (10.5)

3.

NABARD

General Line of Credit (GLC)

i)

GLCI

To provided Refinance in respect of

Bank Rate minus 4.5

Bank Rate minus

loans and advances for the

percentage points (4.5)

3.5 percentage

purposes of Seasonal Agricultural

points (4.5)

Operations (SAO) made by SCBs

and Regional Rural Bank (RRBs)

ii)

GLCII

To provide refinance to SBCs,

Bank Rate minus

Bank Rate minus

RRBs and Commercial banks

4.0 percentage

3.0 percentage

for refinancing Weavers' Co-op.

points

points

society and for other approved

(5.0)

(5.0)

short-term purposes

4.

Primary (Urban) Co-op. Banks

i)

Export Credit Refinance Facility

Bank Rate minus 2

Bank Rate minus 1

percentage points (7.0)

percentage point* (7.0)

ii)

For SSI

Bank Rate (9.0)

Bank Rate (8.0)

5.

Bank Rate minus 0.5

Bank Rate (8.0)

The Loan Repayment made by IDBI]

percentage points (8.5)

6.

Primary Dealers (PDs)

To enable PDs to effectively fulfill their

Bank Rate

Bank Rate

obligations, the RBI is extending

(9.0)

(8.0)

liquidity support to them against the

security of holdings in Subsidiary

General Ledger (SGL) Accounts

7.

State Financial Corporations

Bank Rate (9.0)

Bank Rate (8.0)

8.

Government of India

a)

Shortfall in minimum balances

Bank Rate (9.0)

Bank Rate (8.0)

b)

Ways and Means Advances

Bank Rate (9.0)

Bank Rate (8.0)

c)

Overdraft

Bank Rate plus 2.0

Bank Rate plus 2.0

percentage point (11.0)

percentage point (11.0)

9.

State Governments

a)

Shortfall in minimum balances

Bank Rate (9.0)

Bank Rate (8.0)

b)

Ways and Means Advances

Bank Rate (9.0)

Bank Rate (8.0)

c)

Overdraft

Bank Rate plus 2.0

Bank Rate plus 2.0

percentage points (11.0)

percentage points (10.0)

Penal Interest Rates on shortfalls in

Bank Rate plus 3

Bank Rate plus 3

reserve requirements depending on

percentage points (12.0)

percentage points

duration of shortfall

or Bank Rate plus 5

(11.0) or Bank Rate

percentage points

plus 5 percentage

(14.0)

points (13.0)

*

Effective from April 1, 1999, export credit refinance will be provided at the Bank Rate.

This facility will remain in force upto March 31, 1999.

Interest Rates on Export Credit and Export Credit Refinance

Consequent to the reduction in the Bank Rate from 9.0 per cent per annum to 8.0 per cent per

annum effective from the close of business on March 1, 1999, the scheduled commercial Banks will be provided export credit refinance at 1.0 percentage point below the Bank Rate (i.e., 7.0 per cent per annum the same rate as at present) which will be applicable upto March 31, 1999. With effect from April 1, 1999, export credit refinance will be provided to scheduled commercial banks at the Bank Rate.

Upto March 31, 1999, existing interest rates on export credit prevailing from August 6, 1998

will remain in force.

With effect from April 1, 1999 the interest rates on export credit will stand revised. The existing

interest rates on export credit, the interest rates originally scheduled to be effective from April 1, 1999 and the revised interest rates which will be applicable on export credit from April 1, 1999 are set out in the Annexure.

Annexure

Interest Rates on Export Credit of Scheduled Commercial Banks

(Per cent per annum)

Interest Rates

Existing upto

(Effective April 1, 1999)

March 31, 1999

Originally

Now

scheduled

Revised

1.

Pre-Shipment Credit

a)

(i)

Upto 180 days

9.0

11.0

10.0

(ii)

Beyond 180 days and upto

270 days

12.0

14.0

13.0

b)

Against incentives receivable from

Government covered by ECGC

guarantee upto 90 days

9.0

11.0

10.0

2.

Post-Shipment Credit

a)

on demand bills for transit

9.0

'Not exceeding

'Not exceeding

period (as specified by FEDAI)

11.0'

10.0'

b)

Usance Bills (for total period

comprising usance period of export

bills, transit period as specified by

FEDAI and grace period wherever

applicable)

(i)

Upto 90 days

9.0

'Not exceeding

'Not exceeding

11.0'

10.0'

ii)

Beyond 90 days and upto 6 months

from the date of shipment

11.0

13.0

12.0

b)

Against incentives receivable from

9.0

'Not

'Not

Government covered by ECGC

exceeding

exceeding

guarantee upto 90 days

11.0

10.0

Cash Reserve Ratio (CRR)

Under Section 42 (1) of the Reserve bank of India Act, 1934 all scheduled commercial banks

[excluding Regional Rural Banks (RRBs)] are, at present, required to maintain with the Reserve Bank of India a Cash Reserve Ratio (CRR) of 11.0 per cent of the Net Demand and Time Liabilities (NDTL) (excluding liabilities subject to Zero CRR prescription). It has been decided to reduce CRR by one half of one percentage point. Accordingly, effective from the fortnight beginning March 13, 1999, the CRR to be maintained by scheduled commercial banks (excluding RRBs) is being reduced from 11.0 per cent to 10.5 per cent of NDTL. As a result of 0.50 per cent reduction in CRR, the resources of banks would be augmented by about Rs. 3,100 crore.