RBI Monetary Policy Review: Interest rates unchanged, SLR cut by 0.5%; GDP projection lowered to 7.3%

New Delhi: The Reserve Bank of India (RBI) on Wednesday decided not to change key interest rates in its second bi-monthly monetary policy review.

RBI Governor Urjit Patel- led Monetary Policy Committee (MPC) kept the repo rate unchanged at 6.25 percent. Consequently, the Reverse Repo Rate stands at 6 percent while the CRR remains at 4 percent.

However, RBI has however slashed the Statutory Liquidity Ratio (SLR) or the percentage of deposits that banks have to park in government securities, by 0.5 percent to 20.5 percent, a move that would result increased lending by banks.

“The current state of the economy underscores the need to revive private investment, restore banking sector health and remove infrastructural bottlenecks. Monetary policy can play a more effective role only when these factors are in place,” RBI said.

Key Highlights RBI bi-monthly monetary policy review:

– Targeted interventions by government and RBI to help prop up growth: RBI Guv Urjit Patel

– Farm loan waivers can lead to fiscal slippages, undo work on fiscal deficit done over last two years, Patel

– MPC members unanimously declined to meet Finance Ministry officials, RBI governor

– New data released by CSO needs to be analysed, says Patel

– 5 MPC members voted for status-quo on rates, 1 member not in favour

– MPC member Dr. Ravindra H Dholakia against interest rate pause decision

– Policy decision consistent with neutral stance, says RBI

– SLR cut to be effective from fortnight starting June 24

-MSF rate unchanged at 6.5 percent

– HTM requirement for banks left unchanged

-RBI projects inflation in 2-3.5 percent range for first half of 2017-18 and 3.5-4.5 percent for second half

– Market edges higher post RBI policy decision

– Implementation of GST not expected to have material impact on overall inflation

– FY18 GDP forecast revised down to 7.3 percent from 7.4 percent

– At the current juncture, global political and financial risks materialising into imported inflation and the disbursement of allowances under the 7th central pay commission’s award are upside risks

– RBI cautions against rush of farm loan waivers, warns of risk on fiscal slippages and inflationary spillovers

– Next meeting of the MPC is scheduled on August1 and 2, 2017

– Continuing remonetisation should enable a pick-up in discretionary consumer spending, especially in cash-intensive segments of the economy: RBI

– Industrial outlook survey and the PMIs for manufacturing and services indicate that pricing power remains weak, says RBI

– The current state of the economy underscores the need to revive private investment, restore banking sector health and remove infrastructural bottlenecks: RBI

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Source: Zee news

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