Monetary Policy of RBI: Reserve Bank of India has announced its monetary policy today and has kept the repo rate unchanged at 6.25%. The news comes as a huge surprise to the experts who have been predicting the repo rate to be cut down by at least 25 basis points, while yet others had predicted it to fall by 50 basis points.
Monetary Policy of RBI – Repo rate unchanged at 6.25%, CRR retained at 4%
“The decision of the Monetary Policy Committee is consistent with an accommodative stance of monetary policy in consonance with the objective of achieving consumer price index inflation at 5 per cent by Q4 of 2016-17 and the medium-term target of 4 per cent within a band of +/- 2 percent while supporting growth…The inflation outcome in September and October vindicates (RBI’s) current stance.”
-Monetary Policy Committee headed by Urjit Patel, Governor of India
Despite the fact that greater liquidity in the economy would have helped ease the cash-starved economy to deal with demonetisation bit better, the repo rate has not been altered by the RBI in its new policy announced today. The bank rate has been kept at 6.75%.
The cash reserve ratio that had been increased abnormally to 100 percent last month in a bid to limit the liquidity in the economy, it has been reduced to 4 percent again. Cash Reserve Ratio is the ratio of the bank deposits that the bank has to maintain as cash.
The lower repo rate is in favour of the citizens since it men cheaper loans for buying house, car etc.
RBI also lowered the estimated GDP growth rate to 7.1% for 2016-17, while earlier it was expected to grow at 7.6%.