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RBI Policy: Repo Rate Remains Unchanged; Urjit Patel Sees Inflation Falling To 2%- 3.5%

Along expected lines, the Reserve Bank of India (RBI) Monetary Policy Committee (MPC) today kept the key policy rate unchanged at 6.25 percent for the fourth time in a row.

After deliberations for two days, the MPC headed by RBI Governor Urjit Patel maintained status quo for the second bi-monthly monetary policy for 2017-18. The key policy repo rate, which is the rate at which banks borrow short term funds from the RBI, now remains at 6.25 percent while the reverse repo stands at 6.00 percent.

To address the bad loan stress on the banks’ financials, the central bank said it will continue to work in partnership with the government to address the stress in banks’ balance sheets.

The projection of real GVA (gross value added) growth for 2017-18 has accordingly been revised 10 bps downwards from the April 2017 projection to 7.3 percent, with risks evenly balanced, the RBI said.

If the configurations evident in April are sustained, then absent policy interventions, headline inflation is projected in the range of 2.0-3.5 percent in the first half of the year and 3.5-4.5 percent in the second half.

On liquidity front, the RBI also reduced the Statutory Liquidity Ratio (SLR) of all banks to 20 percent from 20.50 percent of their net deposits from the fortnight starting June 24.

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