Repo rate keeps unchanged at 6.5%

Reserve Bank of India (RBI) in its fifth bimonthly monetary policy review for financial year 2018-19 has decided to maintain status quo in policy rates by keeping repo rate unchanged at 6.5%. The reverse repo rate has also been maintained at 6.25%.  This decision was taken by RBI’s six member Monetary Policy Committee (MPC) headed by RBI Governor Urjit Patel.

Key Facts

The decision of MPC is consistent with stance of calibrated tightening of monetary policy in consonance with objective of achievingmedium-term target for consumer price index (CPI) inflation of 4% within band of +/- 2 per cent, while supporting growth. It has projected retail inflation projection lowered in the range of 2.7-3.2% for 2nd half of 2018-19; 3.8-4.2% in first half of 2019-20. It has forecasted GDP growth for 2018-19 at 7.4% and 7.5% for first half of 2019-20.

Policy Rates

Repo rate: It was unchanged at 6.5%. It is rate at which RBI lends to its clients generally against government securities.

Reverse Repo Rate: It was unchanged at 6.25%. It is rate at which banks lend funds to RBI.

Marginal Standing Facility (MSF) Rate: It was unchanged at 6.75%. 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.

Bank Rate: It was unchanged at 6.75%. It is rate charged by central bank for lending funds to commercial banks. Higher bank rate will translate to higher lending rates by banks. It influences lending rates of commercial banks.

Cash Reserve Ratio (CRR): It was unchanged at 4%. It is amount of funds that banks have to keep with RBI. The RBI uses CRR to drain out excessive money from system.

Statutory Liquidity Ratio (SLR): It cut by 25 basis points to 19.25% from January 1, 2019. 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. It will be reduced by 25 basis points every quarter until it reaches the 18% level.

Advertisement

Month:

Categories: India Current Affairs 2018

Tags:

advertisement

Comments