RBI keeps Repo Rate unchanged in its First Bi-Monthly Monetary Policy Statement 2017-18

Apr 10, 2017 10:05 IST

The Reserve Bank of India (RBI) on 6 April 2017 kept the Repo Rate under the Liquidity Adjustment facility (LAF) unchanged at 6.25 per cent in its First Bi-monthly Monetary Policy Statement 2017-18.

On the basis of an assessment of the current and evolving macroeconomic situation at its meeting today, the Monetary Policy Committee (MPC) of RBI announced following decisions:

• Keep the policy Repo Rate under the Liquidity Adjustment Facility (LAF) unchanged at 6.25 per cent.
• The Reverse Repo Rate under the LAF was kept at 6.0 per cent, an increase by 0.25 per cent.
• The Marginal Standing Facility (MSF) Rate and the Bank Rate were fixed at 6.50 per cent.

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Highlights of the First Bi-Monthly Monetary Policy Statement 2017-18
• Economic indicators point to improvement in the microeconomic outlook.
• There might be an upside risk to inflation from GST, poor monsoon and pay commission award.
• It forecasts GDP growth for current fiscal at 7.4 per cent as against 6.7 per cent of last year.
• The inflation is forecasted at an average 4.5 per cent in Financial Year 2017-18.
• It seeks to manage the currency expansion via Reverse Repo Rate.
• While reviewing the monetary policy, RBI also proposed that banks will now be allowed to invest in Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs) within the 20 per cent umbrella limit.
• RBI also noted that international financial markets were impacted by policy announcements in major advanced economies, geo-political events and country-specific factors.  However, risks to higher growth have arisen from underachievement of macroeconomic policies.
• Upside risk to inflation may arise from one-off effect of Goods and Services Tax Bill.
• Changes in liquidity management will help drain out excess cash in the system.
• RBI will introduce Standing Deposit Facility (SDF) to help manage liquidity effectively.

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