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RBI cuts repo rate to 6 per cent; keeps neutral stance
Aug '17
RBI Governor Urjit Patel (Centre) and other officials at the Third Bi-Monthly Monetary Policy Press Conference; Courtesy: RBI
RBI Governor Urjit Patel (Centre) and other officials at the Third Bi-Monthly Monetary Policy Press Conference; Courtesy: RBI
The Reserve Bank of India (RBI) has cut repo rate by 25 basis points to 6 percent in its third bimonthly monetary policy statement, reducing the key policy rates for the first time this fiscal. Accordingly, the revised reverse repo rate and the marginal standing facility rate stand at 5.75 percent and 6.25per cent respectively, RBI said in the statement.

The revised repo rate is the lowest in six-and-a-half years since November 2010. In its last credit and monetary policy review in June, RBI had kept the repo rate unchanged at 6.25 per cent.

Further, RBI has not changed the 20 per cent figure of statutory liquidity ratio (SLR) – the reserve commercial banks need to maintain in the form of gold and government-approved securities before providing credit to customers.

RBI maintains a neutral policy stance targeting a 4 per cent consumer price index (CPI) inflation figure. The Monetary Policy Committee (MPC) observed that while inflation had ‘fallen to a historic low’, a conclusive segregation of transitory and structural factors driving the disinflation is ‘still elusive’. Some of the upside risks to inflation have either reduced or not materialised, it noted.

On the state of the economy, the MPC feels there is an urgent need to reinvigorate private investment, remove infrastructure bottlenecks and provide a major thrust to the Pradhan Mantri Awas Yojana for housing needs of people. The MPC also favours speedier clearance of projects to boost private investment

Due to a slump in food prices, India’s June CPI inflation figure was an over five-year low of 1.54 per cent, which was well below the RBI’s 4 per cent target and its projection of 2-3.5 per cent for April-September. RBI had raised concerns that inflation could accelerate due to a seasonal rebound in food prices and factors such as planned pay hikes for government employees. (DS)

Fibre2Fashion News Desk – India

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