RBI keeps repo rate unchanged at 6%
The six member Monetary Policy Committee (MPC) of Reserve Bank of India (RBI) has decided to maintain status quo in policy rates by keeping repo rate unchanged at 6.0% under liquidity adjustment facility (LAF).
It was RBI’s fifth bimonthly policy review for financial year 2017-18. The decision was in line with market expectations and consistent with neutral stance of monetary policy in consonance with objective of achieving medium-term inflation target of 4% within a band of +/- 2%, while supporting growth.
Repo rate: It is rate at which RBI lends to its clients generally against government securities. It was unchanged at 6%.
Reverse Repo Rate: It is rate at which banks lend funds to RBI. It was unchanged at 5.75%.
Marginal Standing Facility (MSF) Rate: It is rate at which scheduled banks can borrow funds overnight from RBI against government securities. It is very short term borrowing scheme for scheduled banks. It was unchanged at 6.25%.
Bank Rate: It is rate charged by central bank for lending funds to commercial banks. It was unchanged 6.25%. It influences lending rates of commercial banks. Higher bank rate will translate to higher lending rates by banks.
Cash Reserve Ratio (CRR): It is amount of funds that banks have to keep with RBI. It was unchanged at 4%. The RBI uses CRR to drain out excessive money from system.
Statutory Liquidity Ratio (SLR): It was changed to 19.5% from 20%. It is amount that banks have to maintain a stipulated proportion of their net demand and time liabilities (NDTL) in form of liquid assets like cash, gold and unencumbered securities, treasury bills, dated securities etc.