RBI Governor Raghuram Rajan left open the door for more easing and affirmed the central bank’s commitment to ease it as and when room is available
Cautious ahead of the US Fed meeting, RBI kept its monetary policy steady on Tuesday amid lingering concerns over inflation, after having already cut the repo rate by a sharper 50 basis points at its last meet. RBI Governor Raghuram Rajan left open the door for more easing and affirmed the central bank’s commitment to ease it as and when room is available, saying inflation is likely to perform better than expected.
Following are the highlights of RBI’s fifth bi-monthly monetary policy statement for 2015-16
* The repo rate at which the Reserve Bank lends to the system will continue at 6.75 per cent.
* The cash reserve ratio (CRR) or the amount of deposits banks park with RBI has also been unchanged at 4 per cent.
* GDP to grow at 7.4 per cent in 2015-16; mild downside bias
* Economy in early stages of recovery, weakness persist
* Farm sector subdued; rabi, kharif prospect hit by monsoon
* Retail inflation at 6 per cent by January, 5 per cent by March 2017
* Inflation uptick for 2 months warrants vigilance
* Open to accommodative monetary policy, keeping inflation under control
* Implementation of Pay Panel recommendations to be factored in for future policy deliberation
* Banks transmitted only 0.60 per cent of 1.25 per cent repo rate cut benefits to borrowers
* To shortly finalise base rate computation based on marginal cost of funds
* Clean up of bank balance sheets will create room for fresh lending
* Linking of small savings rate with market interest rates on anvil, to help in monetary transmission
* Early signs of recovery in pharma, electronic exports
* Sixth Bi-monthly Monetary Policy on February 2.
Raghuram Rajan has cut the key rates four times by a cumulative 1.25 per cent since January, including the surprise 0.50 per cent cut at the last policy review on September 29. Raghuram Rajan was widely expected to hold rates at this review due to emerging worries on inflation and impact of a possible rate hike by the US Fed.