The Governor Raghuram Rajan-led Reserve Bank of India (RBI) held policy rate at 7.25 percent on Tuesday, pausing as widely expected after a spike in food prices sent consumer inflation to an eight-month high.
The RBI has reduced the policy rate by a total 75 basis points since January, when it embarked on an easing cycle.
Monetary and Liquidity Measures:
On the basis of an assessment of the current and evolving macroeconomic situation, the RBI has decided to:
1. keep the policy repo rate under the liquidity adjustment facility (LAF) unchanged at 7.25 per cent;
2. keep the cash reserve ratio (CRR) of scheduled banks unchanged at 4.0 per cent of net demand and time liability (NDTL);
3. continue to provide liquidity under overnight repos at 0.25 per cent of bank – wise NDTL at the LAF repo rate and liquidity under 14 – day term repos as well as longer term repos of up to 0.75 per cent of NDTL of the banking system through auctions; and
4. continue with daily variable rate repos and revers e repos to smooth liquidity.
5 Consequently, the reverse repo rate under the LAF will remain unchanged at 6.25 per cent, and the marginal standing facility (MSF) rate and the Bank Rate at 8.25 per cent
Read full text: Raghuram Rajan’s third bi-monthly policy statement