Bi-monthly monetary policy: RBI keeps rates unchanged

The central bank has also kept the cash reserve ratio (CRR) of scheduled banks unchanged at 4.0 per cent of net demand and time liabilities (NDTL).

“It has been decided to continue to provide liquidity as required but progressively lower the average ex ante liquidity deficit in the system from one per cent of NDTL to a position closer to neutrality,” an RBI statement said.

Consequently, the reverse repo rate under the LAF will remain unchanged at 6.0 per cent, and the marginal standing facility (MSF) rate and the Bank Rate at 7.0 per cent.

“We have kept rates on hold, maintaining an accommodative stance while we await developments. We are within the inflation band given to us by the government and expect to be around 5 per cent CPI inflation by March 2017, absent unforeseen eventualities,” said RBI governor Raghuram Rajan in post-policy press conference.

The governor said the rationale behind the current policy stance is the projected trajectory of inflation over the rest of the year due to increase in food prices, pulses and cereals. 

Tirupur Exporters' Association (TEA) president A Sakthivel welcomed RBI's full preparedness to meet out the eventuality in case, any disturbance happens in the foreign currency market after redemption of Foreign Currency Non Resident ((FCNR)(Bank)), about $26 billion in September 2016 and also appreciated maintaining of the foreign exchange resource at $365.7 billion by July 5, 2016.

Citing Rajan's statement, Sakthivel said that despite easy liquidity, banks have passed past rate cuts into lending rate only modestly and appealed to the banks to reduce the lending rates and help the SME exporting units to stay competitive and also attract them to make investments in the new projects and avail the 25 per cent capital subsidy benefit given under ATUFS, announced recently in Special Package for garment sector. (RKS)

Fibre2Fashion News Desk – India