Bank of baroda

Mid-Term Review of Annual Policy Statement
The Mid-Term Review of the Annual Policy Statement of RBI for fiscal 2006, which was released in late October 2005,
included the following measures:
Monetary Measures
Bank rate kept unchanged at 6.0%.
Reverse repo rate increased by 25 basis points to 5.25%, effective October 26, 2005. The spread between reverse
repo rate and the repo rate under LAF was maintained at 100 basis points.
The cash reserve ratio was kept unchanged at 5.0%.
Interest Rate Policy
Indian Banks’ Association is being asked to review the benchmark prime lending rate system and issue transparent
guidelines for appropriate pricing of credit.
Financial Markets
RBI constituted a new department called the Financial Markets Department in July 2005 with a view to moving
towards functional separation between debt management and monetary operations.
RBI proposes the introduction of intra-day short selling in government securities proposed.
NDS-OM module to be extended to all insurance entities that are mandated to invest in government securities.
A screen-based negotiated quote-driven system for call/notice and term money markets and an electronic trading
platform for market repo operations in government securities are being developed by the Clearing Corporation of
India Ltd.
External Commercial Borrowings (ECBs)
Special purpose vehicles, or any other entity notified by RBI, which are set up to finance infrastructure companies/
projects would be treated as financial institutions and ECBs raised by such entities would be considered under the
approval route.
Banks are to be allowed to issue guarantees or standby letters of credit in respect of ECBs raised by textile
companies for the modernisation or expansion of textile units.

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