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RBI Policy- RBI keeps repo rate unchanged at 7.5%; CRR maintained at 4%
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| Posted Date : 07-Apr-2015 , 12:37:12 pm | Posted By CASANSAAR |
The Reserve Bank of India (RBI) kept the repo rate unchanged at 7.5% in its monetary policy review on tuesday. Along market expectations, Raghuram Rajan also kept the Cash Reserve Ratio (CRR) at 4%.
"Transmission of policy rates to lending rates has not taken place so far despite weak credit off take and the front loading of two rate cuts. With little transmission, and the possibility that incoming data will provide more clarity on the balance of risks on inflation, the Reserve Bank will maintain status quo in its monetary policy stance in this review," said Rajan in his statement.
"The Monetary Policy Framework Agreement signed by the Government of India and the Reserve Bank in February 2015 will shape the stance of monetary policy in 2015-16 and succeeding years. The Reserve Bank will stay focussed on ensuring that the economy disinflates gradually and durably, with CPI inflation targeted at 6 per cent by January 2016 and at 4 per cent by the end of 2017-18," RBI said.
According to RBI, the outlook for growth is improving gradually. "Comfortable liquidity conditions should enable banks to transmit the recent reductions in the policy rate into their lending rates, thereby improving financing conditions for the productive sectors of the economy. Along with initiatives announced in the Union Budget to boost investment in infrastructure and to improve the business environment, these factors should provide confidence to private investment and, together with the conducive outlook on inflation, deliver real income gains to consumers and lower input cost advantages to corporates," said RBI.
In January and March, RBI cut the repo rate by 25 bps each but that hasn't trickled down, barring some state-owned banks. A basis point is one-hundredth of a percentage point. A 50 bps CRR cut would free up about Rs 43,000 crore funds, adding to liquidity in the banking system.
In January and March, RBI cut the repo rate by 25 bps each but that hasn't trickled down, barring some state-owned banks. A basis point is one-hundredth of a percentage point. A 50 bps CRR cut would free up about Rs 43,000 crore funds, adding to liquidity in the banking system.
According to Rajan, it takes three or four quarters for RBI's rate action to be transmitted through to the banks. This would mean lenders should be reducing rates by October, when loans are seen starting to pick up.
Rajan had cut repo rate by 25 bps in March, on the back of lower inflation and Rajan's thumbs up to measures announced by Finance Minister Arun Jaitley in Budget 2015.
RBI is of the opinion that softer readings on inflation are expected to come in through the first half of 2015-16 before firming up to below 6% in the second half.
Rajan had explained in March, "The need to act outside the policy review cycle is prompted by two factors: First, while the next bi-monthly policy statement will be issued on April 7, 2015 the still weak state of certain sectors of the economy as well as the global trend towards easing suggests that any policy action should be anticipatory once sufficient data support the policy stance. Second, with the release of the agreement on the monetary policy framework, it is appropriate for the Reserve . (RBI- the Economic Times)
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Category : RBI |
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| Comments |
| Posted By : CA.Subhash Chandra Podder |
08-Apr-2015, 12:14:17 |
| What's wrong in it ? Governor of RBI played well. Banks are sitting on money. management of Banks strictly review the policy framed by RBI on regular basis .( source economic times ) |
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