RBI keeps interest rates unchanged

Marco Green
December 5, 2018

Treasury heads of 10 banks surveyed by Mint said the RBI repo rate would be maintained at 6.5% and the policy stance would remain "calibrated tightening".

The monetary policy committee maintained the policy stance to "calibrated tightening". Ravindra Dholakia, however, had voted to change the stance to neutral. Moreover, the central bank had said in its October policy that a rate cut was off the table. The commercial banks borrow funds only if they witness a shortfall in their funds. With the market expecting RBI to hold the repo rate at 6.5%, Mint takes a look at the five things that could be on the MPC's radar.

While the Statutory Liquidity Ratio now remains unchanged at 19.5%, the RBI has said it will be gradually reduced to 18% over the next six quarters. However, it announced statutory liquidity ratio (SLR) will go down by 25 bps every quarter from January. Currently, SLR stands at 19.5 per cent. SLR refers to the share of bank's total deposit that it needs to maintain itself as liquid assets. One basis point is one-hundredth of one percentage point, i.e. 0.01 percent.

Will RBI lower the cash reserve ratio for banks? For the period October-March, the GDP growth forecast is pegged between 7.2 and 7.3 percent.

After back-to-back hikes since June, the RBI had kept interest rates unchanged in October, surprising markets that had expected a rate hike to support the tumbling rupee and combat inflationary pressures from high oil prices. In October, inflation eased to 3.31 percent.

Inflation projection lowered: Inflation has been projected at 2.7-3.2 per cent for second half of FY2018-19 and 3.8-4.2 per cent for the first half of FY 2019-20, with risks tilted to the upside. The three-day policy review meeting of the Monetary Policy Committee (MPC) headed by Governor Urjit Patel began in Mumbai on Monday.

Other reports by Click Lancashire

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