RBI keeps key rate unchanged

06 April, 2018, 04:20 | Author: Natasha Holloway
  • Monetary policy: RBI lowers inflation target for first half of FY19

The Reserve Bank of India on Thursday kept the repo rate and the reverse repo rate unchanged at 6% and 5.75%. Positives like a cooling down in CPI inflation to 4.4 per cent for February had led to speculation over RBI's rate call.

"It has been decided that, with immediate effect, entities regulated by RBI shall not deal with or provide services to any individual or business entities dealing with or settling [cryptocurrencies]". The RBI is also taking time to evaluate the market impact of developments like increased global crude prices, a hike in US Fed Rates etc. that could have impact on the Indian market in the coming months.

Moreover, the intent of the policy seems neutral and sends signals for supporting growth in near-term, he added. The key Repo rate has been kept at 6 and other key parameters remaining the same has been widely expected while 5 out 6 members of MPC were neutral.

The central bank sees several factors influencing the inflation outlook.

The "inflation print for February did turn out to be softer than our projection", the central bank's governor, Urjit Patel, told media after the policy decision. GDP growth has been projected to strengthen to 7.4 percent in FY19, from 6.6 percent in 2017-18; 7.3-7.4 percent in H1 and 7.3-7.6 percent in H2, RBI said.

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On the downside, the central bank noted that "rising trade protectionism and financial market volatility could derail the ongoing global recovery".

Rajesh Shah, Ficci President, said: "While the Reserve Bank of India has maintained status quo in current monetary policy statement, we hope that RBI will soon consider cut in policy rate and give a further boost to demand and investments".

"The Goldilocks scenario that RBI has outlined for the new fiscal year - with higher growth expectations and lower inflationary forecasts - could very well indicate rates on hold for the whole year", said Rajni Thakur, economist at RBL Bank Ltd.in Mumbai.

Scheduled Commercial Banks (SCBs), excluding regional rural banks (RRBs), were required to implement Ind AS from April 1, 2018. In our assessment, some of the banks are still not prepared to move into Ind AS. "The CC facility places undue burden on banks in managing their liquidity requirements with corresponding repercussions for RBI's liquidity operations", said RBI Deputy Governor NS Vishwanathan.

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