RBI kept the short-term lending rates, Repo rate, unchanged at 6.25 per cent. It came as a surprise as they did not deliver the expected 25 basis points cut in the repo rate at the sixth bimonthly meet this afternoon. Consequently, the reverse repo rate under the LAF remains unchanged at 5.75 per cent, and the marginal standing facility (MSF) rate and the Bank Rate at 6.75 per cent.
RBI said all the six members of monetary policy committee voted in favour of the decision.
RBI changed its stance from ‘accommodating’ to ‘neutral’. MPC (Monetary Policy Committee) in its statement upholds three major factors and throws the ball in the banks court by mentioning the NPAs, which need to be resolved. Second, re-capitalisation of the PSUs and determination of a full formula for determining the interest in the rate of small savings needs to be prioritised.
The last time the repo rate was cut was on October 4, 2016, when the RBI had reduced its repo rate by 0.25 per cent.
Top 10 takeaways from the RBI Conference:
1. Fake notes are not the real concern currently, Patel
2. There is still scope for the lending rate to come down, Patel
3. We await greater data to know whether impact of demonetisation is truly transient; so we remain flexible, says Viral Acharya
4. We are mainly driven by global inflation concerns on fuel and metals side, says RBI deputy governor Viral Acharya
5. RBI deputy governor R Gandhi says from February 20, cash withdrawal limit from the savings account will be RS 50,000 per week. From 13 March, no limit on cash withdrawals from savings bank accounts.
6. Assessing economic conditions for short term is difficult due to demonetisation, says Patel.
7. MPC sensitive to the need to have a calibrated movement to CPI inflation target of 4 percent, says Patel
8. In these highly uncertain conditions, MPC exercised abundant prudence in keeping rates on hold, says RBI governor
9. MPC says timely transmission of policy rates to banks lending rates will improve if sector’s NPA resolved more quickly and efficiently
10. MPC says it is committed to keeping efficient and appropriate liquidity management.
11. GVA growth for FY17- 6.9 per cent; GVA Growth for FY18- 7.4 per cent
12. MPC says persistence of inflation excluding food and fuel could set a floor on further downward movements in headline inflation
13. MPC says decision is in consonance with objective of achieving consumer price index (CPI) inflation at 5 per cent by Q4 of 2016-17
BW Reporters
Naina Sood is a Economics graduate and has done her post graduation in International economics and Trade. She has deep interests in Indian economy and reforms
