RBI mid quarter monetary policy review: All rates remain unchanged

The Reserve Bank of India (RBI) in its mid-quarter Monetary Policy Review kept the interest rates unchanged. By this move, the central bank gave the indication that solely monetary policy can’t deal with the inflation; the government must take initiatives on supply-side reforms and put in place better storage facilities to hold food prices.

This has come as a welcome relief for the industry which is facing depressing economic environment as indicated 1.8% growth in industrial output in November 2013.

What are Key policy rates?

The Key Policy Rates or signally rates are decided by RBI. These are Bank Rate, Repo Rate, Reverse Repo Rate, Marginal Standing Facility, Cash Reserve Ratio and Statutory liquidity ratio (SLR).

On the basis of an assessment of the current and evolving macroeconomic situation, the RBI decided to:

  • Keep the policy Repo Rate under the Liquidity Adjustment Facility (LAF) unchanged at 7.75%, and
  • Keep the Cash Reserve Ratio (CRR) of scheduled banks unchanged at 4.0% of the Net Demand and Time Liability (NDTL).
  • Wait for more data before taking policy action, as current inflation is high but its trajectory is uncertain.
  • Thus, the reverse repo rate under the LAF will remain unchanged at 6.75%, and the Marginal Standing Facility (MSF) rate and the Bank Rate at 8.75%.

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