The Reserve Bank of India (RBI) on 6 December 2017 released its Fifth Bi-monthly Monetary Policy Statement 2017-18.
After assessing the current and evolving macroeconomic situation in the economy, the Monetary Policy Committee (MPC) decided to keep the Repo Rate under the Liquidity Adjustment Facility (LAF) unchanged at 6.0 per cent.
Consequently, the Reverse Repo Rate was also kept unchanged at 5.75 per cent and the Marginal Standing Facility (MSF) Rate and the Bank Rate remained at 6.25 per cent.
The Monetary Policy Committee voted in the ratio of 5:1 in favour of no rate change, with only Ravindra Dholakia favouring a 25 basis point cut in Repo Rate.
This is the fourth time in a row that Dholakia casted a dissenting vote. In August 2017, when MPC voted for a quarter point cut in the Repo Rate, Dholakia sought a reduction of 50 basis points.
RBI releases Third Bi-monthly Monetary Policy Statement 2017-18
Highlights of the Fifth Bi-monthly Monetary Policy Statement 2017-18
• MPC took note of the pressures of food and fuel prices on evolving cost of living conditions and inflation expectations while keeping the policy repo rate unchanged.
• MPC’s decision was also restrained by recent developments such as increase in resource mobilisation in the primary capital market and reforms that have contributed to an improvement in India’s Ease Of Doing Business ranking.
• RBI kept the growth projection that is Gross Value Added (GVA) unchanged at 6.7 per cent after recognising significant developments such as GST (goods and services tax) and bank recapitalisation package.
• RBI revised the Consumer Price Index (CPI) inflation forecast by 10 basis points, it now expects retail inflation at 4.3-4.7 per cent including central government house rent allowance-induced addition of up to 35 basis points.
• Liquidity surplus in the banking system continued to decline due to several factors like the RBI’s open market operations, cash withdrawals from the banking system and indirect tax outflows.
• Growth in bank deposits also slowed down from 11.8 per cent in end-March 2017 to 8.1 per cent in November 2017.
• RBI also stated that the 'Recapitalisation' or capital infusions announced recently by the government will be based strictly on merit, lenders will not get money unless they clean up their act.
RBI releases second Bi-monthly Monetary Policy Statement 2017-18
When: 6 December 2017
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