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RBI keeps rates unchanged
07
Apr '15
Raghuram Rajan/C: RBI
Raghuram Rajan/C: RBI
RBI governor Raghuram Rajan has maintained status quo on the repo rate and cash reserve ratio (CRR) in the central bank's first monetary policy review of this financial year today.

The RBI kept repo rate unchanged at 7.5 per cent under the liquidity adjustment facility (LAF). At its annual policy announcement today, the RBI governor also said that the cash reserve ratio (CRR) of scheduled banks will remain unchanged at 4 per cent of net demand and time liability (NDTL).

The RBI will continue to provide liquidity under overnight repos at 0.25 per cent of bank-wise NDTL at the LAF repo rate and liquidity under 7-day and 14-day term repos of up to 0.75 per cent of NDTL of the banking system through auctions.

The RBI will continue with daily variable rate repos and reverse repos to smooth liquidity.

Consequently, the reverse repo rate under the LAF will remain unchanged at 6.5 per cent, and the marginal standing facility (MSF) rate and the Bank Rate at 8.5 per cent.

Rajan said the industrial sector, and in particular, manufacturing appears to be regaining momentum. He projected the output growth for 2015-16 at 7.8 per cent.

The RBI decision to maintain status quo seemed on expected lines despite a clamour from industrialists to slash rates in order to boost the economy. Rajan said any future cut in rates will depend on how much the RBI has to do so.
 
Ahead of today’s announcement by the RBI, a survey by Federation of Indian Chambers of Commerce and Industry (Ficci) showed that reductions in key interest rate by the RBI have not helped stimulate investment in the manufacturing sector.
 
According to Ficci’s poll, 69 per cent respondents did not foresee any substantial increase in investments by their organisation as a result of reduction in repo rates. 
 
RBI has lowered interest rates by a total of 0.50 per cent since January this year, but banks are yet to pass on the benefits to borrowers.
 

Fibre2fashion News Desk - India


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