RBI monetary policy: Repo rate kept unchanged at 6%

Statutory liquidity ratio reduced by 50 basis points to 19.5%

The Reserve Bank of India’s (RBI’s) six-member Monetary Policy Committee (MPC), headed by Governor Urjit Patel, on Wednesday kept the repo rate – the key policy rate at which the RBI lends money to banks – unchanged at six per cent, in a decision that was broadly in line with expectations.

The RBI reduced the gross value added (GVA) growth target for the current financial year to 6.7 per cent from 7.3 per cent earlier.(economy news)

 In its fourth bimonthly review of the monetary policy, the RBI, however, lowered the statutory liquidity ratio – the reserve requirement that commercial banks need to maintain in the form of gold or government-approved securities before providing credit to customers – by 50 basis points to 19.5 per cent, with effect from October 14 fortnight. The MPC voted 5-1 in favour of the status quo on both repo rate and reverse repo rate -- the latter was kept unchanged at 5.75 per cent.In the one year since the setting up of the MPC in October 2016, it has lowered the repo rate twice – by 25 basis points each in October 2016 and August 2017.

Most analysts had been expecting the central bank to maintain the status quo this time, but effect a rate cut later in the financial year. Some have even been saying that the rate-cut cycle, which started on January 15, 2015 with a rate reduction to 7.75 per cent from 8 per cent, might have reached its end.