News Nation Logo


RBI's second bi-monthly monetary policy: Repo rate unchanged at 6.25%, FY 2017-18 growth projection cut to 7.3% from 7.4%

The Reserve Bank Of India (RBI) Under The Aegis Of Governer Urjit Patel Shall Make Its Bi-monthly Monetary Policy Announcement Later On Wednesday.

News Nation Bureau | Edited By : Gautam Lalotra | Updated on: 07 Jun 2017, 03:02:46 PM
Reserve Bank of India - File Photo

New Delhi:

The Reserve Bank of India (RBI) announced its second bi-monthly monetary policy for 2017-18 on Wednesday. The current repo rate is 6.25 percent and the RBI did not change it in the last three policy meeting. Reverse repo rate stayed at 6 percent. 

Here are the highlights of RBI's bi-monthly monetary policy for 2017-18 - 

#The monetary policy committee cut the SLR by 50 basis points to 20 percent. 

#Old benchmark gilt - 6.97, 2026 yield trading down at 6.73 percent.

#RBI projects the inflation in 2-3.5 per cent range for first half of 2017-18 and 3.5-4.5 per cent for second half.

#RBI cut the growth projection for current fiscal to 7.3 percent from 7.4 percent

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

#Uncertain global economic environment and risk of inflation compelled the central bank to keep the repo rate unchanged again.

Earlier on Tuesday, Reserve Bank Governor Urjit Patel-led Monetary Policy Committee (MPC) began its bi-monthly interest rate review amid the government pitching for a reduction in borrowing cost to help push private investments.

Most analysts, however, expected no change in interest rates in view of more than USD 60 billion of excess liquidity in the system.

Those seeking a cut in interest rates cite consumer price inflation slowing down to 2.99% in April, economic growth during the last fiscal at its slowest pace in two years and weakest loan demand since at least 1992.

Finance Minister Arun Jaitley on Monday made a case for cut in interest rates, saying inflation has been under control for long and is likely to remain so on the back of good monsoon while there is no likelihood of a spike in oil prices.

"...growth and investment need to improve. These are indicators which are available. Any finance minister under these circumstances would like a rate cut, the private sector would like a rate cut. But then when you entrusted it with the MPC, I would rather wait for their decision," he had said.

India Inc had also pitched for a rate cut to boost GDP growth that fell to 7.1% in 2016-17 from 8% in the previous fiscal.

However, financial sector experts believed the Reserve Bank would likely maintain status quo at its second bi-monthly monetary policy review of the current fiscal as the central bank would like to gauge the impact of GST rollout on inflation.

The RBI may wait for the July 1 rollout of the GST and assess the impact of the new indirect tax regime on inflation before tinkering with the policy rates.

The inflation data for July, to be released in August, will give an indication of the impact of Goods and Services Tax (GST) on prices.

Retail inflation, based on Consumer Price Index (CPI), dropped to multi-year low at 2.99% in April over last year, mainly due to lower cost of food items, including pulses and vegetables. CPI inflation was 5.47% in April 2016.

At the same time, inflation based on the wholesale price index slipped to a four-month low of 3.85 per cent in April as both food articles and manufactured items showed cooling in prices.

On April 6, the Reserve Bank had left its benchmark lending rate unchanged at 6.25 per cent for the third monetary policy review in a row, citing upside risk to inflation.

However, experts also feel that RBI will likely strike a less hawkish tone.

The RBI is unlikely to cut rates in its upcoming policy review but the tone of the statement will be less hawkish than the previous one, rating agency ICRA said.

For all the Latest Business News, Download News Nation Android and iOS Mobile Apps.

First Published : 07 Jun 2017, 02:30:00 PM

Related Tags:

RBI Monetary Policy