Update: June6, 2018 (Wenesday): The Monitory Policy Committee (MPC) of Reserve Bank of India in its second Bi-Monthly Statement for 2018-19, announced today(June 6,2018) increase the policy repo rate under the liquidity adjustment facility LAF) by 25 basis points to 6.25 per cent. Pursuant to increase in Repo rate, the reverse repo rate under the LAF stands adjusted to 6.0 per cent, and the marginal standing facility (MSF) rate and the Bank Rate to 6.50 per cent.
The policy key rates revised at present are as under.
|CRR (Cash Reserve Ratio)||4.00%|
|SLR (Statutory Liquidity Ratio)
With effect from 14.10.2017
|Reverse Repo Rate||6.00%|
|MSF Rate (Marginal Standing Facility Rate)||6.50%|
The MPC reiterated that the decision of the MPC is consistent with its commitment to keep headline inflation close to 4 per cent within a band of +/- 2 per cent, while supporting growth. The main considerations underlying the decision are set out in the statement is that since the MPC’s meeting in early April, the price of Indian basket of crude surged from US$ 66 a barrel to US$ 74. This, along with an increase in other global commodity prices and recent global financial market developments, has resulted in a firming up of input cost pressures, as also confirmed in the Reserve Bank’s IOS for manufacturing firms in Q2:2018-19. The statement said that Actual inflation outcomes since the April policy have evolved broadly on the lines of the projected trajectory. Although the summer momentum in vegetable prices was weaker than the usual pattern, there was an abrupt acceleration in CPI inflation excluding food and fuel. The resulting pick-up in the momentum of inflation excluding food, fuel and HRA has imparted persistence into higher CPI projections for 2018-19. The first bi-monthly resolution of 2018-19 in April projected CPI inflation in the range of 4.7-5.1 per cent in H1:2018-19 and 4.4 per cent in H2, including the HRA impact for central government employees with risks tilted to the upside. Excluding the impact of HRA revisions, CPI inflation was projected at 4.4-4.7 per cent in H1:2018-19 and 4.4 per cent in H2. Actual inflation outcomes since the April policy have evolved broadly on the lines of the projected trajectory. However, there has been an important compositional shift. While the summer momentum in vegetable prices was weaker than the usual pattern, there was an abrupt acceleration in CPI inflation excluding food and fuel.
As per present rule, banks are permitted to exceed the limit of 25% in totla investments under HTM category subject to excess investments comprise of SLR securities and total SLR securities held under HTM category are not more than 20.5% of NDTL. In order to align the SLR holdings under HTM category with mandatory SLR, the Apex bank has reduced the HTM category ceiling from 20.5% to 19.5% in a phased manner, i.e. 20 per cent by December 31, 2017 and 19.5 per cent by March 31, 2018.
The MPC in its assessment observed that the economy is on a recovery path, including early signs of a revival of investment activity.