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RBI keeps policy rates unchanged in 3rd bi-monthly monetary policy review

The Reserve Bank of India (RBI) in its third bi-monthly monetary policy review for year 2016-17 has maintained status quo in key policy interest rate.

It was last bi-monthly monetary policy review of RBI Governor Raghuram Rajan who will step down in September 2016 after completing his term.

Policy Rates

  • Repo rate under the liquidity adjustment facility (LAF): unchanged at 6.50 per cent.
  • Reverse repo rate under the LAF: unchanged at 6.0 per cent.
  • Marginal standing facility (MSF) rate: 7 per cent.

Reserve Ratios

  • Cash Reserve Ratio (CRR) of scheduled banks: Unchanged at 4.0 per cent of net demand and time liability (NDTL).
  • Statutory Liquidity Ratio (SLR): Unchanged at 21 per cent.

Comment

The policy interest rates were kept unchanged while maintaining an accommodative policy stance on basis of an assessment of the current and evolving macroeconomic situation in country.

Other highlights

  • RBI said risks to the inflation target of 5% for March 2017 continue to be on the upside.
  • The passage of the Goods and Services Tax (GST) Bill augurs well for the growing political consensus for economic reforms.
  • Timely implementation of GST will be challenging but it will raise returns to investment across much of the economy.
  • It will also even while strengthening government finances over the medium-term. This should boost business sentiment and eventually investment.

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RBI rates unchanged in 6th bi-monthly monetary policy review

The Reserve Bank of India (RBI) in its sixth bi-monthly monetary policy review for year 2016 has maintained status quo in key policy interest rate.

The key policy interest rates were kept unchanged on the basis of an assessment of the current and evolving macroeconomic situation in the country. RBI has kept its stance on the credit policy accommodative.

Key policy rates are

  • Repo rate under the liquidity adjustment facility (LAF): unchanged at 6.75 per cent.
  • Reverse repo rate under the LAF: unchanged at 5.75 per cent.
  • Marginal standing facility (MSF) rate and the Bank Rate has unchanged at 7.75 per cent.
  • Cash Reserve Ratio (CRR) of scheduled banks: Unchanged at 4.0 per cent of net demand and time liability (NDTL).
  • Continuation of liquidity under overnight repos at 0.25 per cent of bank-wise NDTL at the LAF repo rate.
  • Continuation of liquidity under 14-day term repos as well as longer term repos of up to 0.75 per cent of NDTL of the banking system through auctions.

RBI projections

  • In Financial Year (FY) 2016 growth will be at 7.4% with downward bias and FY17 growth at 7.6 % despite headwinds.
  • Inflation will be around 5% for FY 16-17 due to good monsoon projections that can pull the inflation down. The inflation rate has evolved closely along the trajectory set by the monetary policy stance of RBI.

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