Highlights of RBI Monetary Policy 2016

By: | Published: December 7, 2016 3:28 PM

Taking everyone by surprise, Reserve Bank of India's Governor Urjit Patel on Wednesday kept the repo rate unchanged even as the central bank lowered GDP growth rate to 7.1 per cent and short term disruption in economic activities due to demonetisation.

RBI's monetary policy committee voted 6-0 to leave the repo rate unchanged, after cutting it by 25 basis points (bps) at its last review in October, also unanimously. (Reuters)RBI’s monetary policy committee voted 6-0 to leave the repo rate unchanged, after cutting it by 25 basis points (bps) at its last review in October, also unanimously. (Reuters)

Taking everyone by surprise, Reserve Bank of India’s Governor Urjit Patel on Wednesday kept the repo rate unchanged even as the central bank lowered GDP growth rate to 7.1 per cent and short term disruption in economic activities due to demonetisation. RBI’s monetary policy committee voted 6-0 to leave the repo rate unchanged, after cutting it by 25 basis points (bps) at its last review in October, also unanimously. The RBI’s more cautious approach also comes amidst a volatile global environment, which saw the rupee sink to a record low last month as part of a sell-off in emerging market assets. Pressure on the RBI and Governor Urjit Patel to act has grown since Prime Minsiter Modi stunned the country on November 8 with a drastic plan to abolish Rs 500 and Rs 1,000 notes, removing 86 percent of the currency in circulation in a bid to crack down on black money. Next monetary policy is scheduled on February 8, 2017.

We take a look at the highlights of RBI’s fifth bi-monthly monetary policy statement of the finacial year 2016-17:

1. Repo rate unchanged at 6.25%, Reverse Repo at 5.75%

2. Cash reserve ratio or CRR unchanged at 4%

3. Cuts growth forecast to 7.1%, from 7.6% for this fiscal

4. Inflation target remains 5% for March 2017, upside risk

5. Demonetisation to lower prices of perishables, could reduce inflation by 10-15 basis points by December

6. All MPC members voted in favour of status quo in policy

7. Demonetisation to result in short-run disruptions in cash-intensive sectors

8. Crude price volatility, surge in financial market turbulence could put March end inflation target at risk

9. Foreign exchange reserve rose to all-time high of $364 billion on December 2

10. RBI injected Rs 1.1 lakh crore liquidity through OMO purchases this fiscal

(With inputs from Agencies)

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