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RBI REPO rate and key policy rates updated 6th December  2017

RBI REPO rate and key policy rates updated 6th December 2017

RBI keeps Repo rate, CRR, SLR, Bank rate …unchanged

The Reserve Bank of India on Wednesday 6th December 2017 in its fifth Bi-Monthly Statement for 2017-18   kept the policy repo rate under the liquidity adjustment facility (LAF) unchanged at 6.0 per cent. The marginal standing facility (MSF) rate and the Bank Rate remained at 6.25 per cent.

The policy key rates at present are as under.

CRR (Cash Reserve Ratio)   4.00%
SLR  (Statutory Liquidity Ratio)

With effect from 14.10.2017*

Repo Rate   6.00%
Reverse Repo Rate   5.75%
MSF Rate (Marginal Standing Facility Rate)   6.25%
Bank Rate   6.25%

Dr. Chetan Ghate, Dr. Pami Dua, Dr. Michael Debabrata Patra, Dr. Viral V.Acharya and Dr. Urjit R. Patel were in favour of the monetary policy decision, while Dr.Ravindra H. Dholakia voted for a policy rate reduction of 25 basis points. The minutes of the MPC’s meeting will be published by December 20, 2017.

*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 capital in primary capital market has increased significantly after several years of sluggish activity which will add to demand in the short run and boost the growth potential of the economy over the medium-term. Further, the international ranking of ‘improvement in the ease of doing business’should help sustain foreign direct investment in the economy. It is also observed that large distressed borrowers are being referenced to the insolvency and bankruptcy code (IBC) and public sector banks are being recapitalised, which should enhance allocative efficiency.

Third & Fourth  bimonthly reports

The key policy rates:

CRR (Cash Reserve Ratio)   4.00%
SLR  (Statutory Liquidity Ratio  20.00%
Repo Rate   6.00%
Reverse Repo Rate   5.75%
MSF Rate (Marginal Standing Facility Rate)   6.25%
Bank Rate   6.25%

It is informed in the RBI’s Press Release that the six members Monetary Policy Committee (MPC) has taken neutral stance in  view of consonance with the objective of achieving the medium term target for consumer price index (CPI) inflation of 4% within a band of +/- 2 %, while supporting  growth.Though  MPC  noted  that  some  of  the  upside  risks  to  inflation  have  either  reduced  or  not materialised  the baseline path of headline inflation excluding the HRA impact has fallen below the projection made in June to a little above 4 per cent by Q4 which has necessitated them to reduce the policy rates by 25BPS.
Related articles:

Different types of repos in money market

Do you know that Repo auction frame work is different from Repo rate

How RBI monitors money circulation in India?
What is bank rate?
Effects of Repo Rate, Reverse Repo rate changes
What is Marginal Standing Facility (MSF)?

CRR and SLR: How they affect on bank credits?

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