Highlights of RBI monetary policy statement

RBI Governor Raghuram Rajan kept the benchmark repo rate or the rate at which the central bank lends money to banks, unchanged at 7.5 per cent, in the first bimonthly monetary policy review of 2015-16. RBI has already reduced the repo rate by 50 basis points (bps) so far this year, in two unscheduled actions outside of its policy meetings. However, this has not resulted in banks passing on the benefits to customers. Banks were hoping for a cut in cash reserve ratio to cut interest rates.

Following are the highlights of RBI’s first bi-monthly monetary policy statement, 2015-16:

• Short-term lending rate (repo) unchanged at 7.5%.
• Cash Reserve Ratio unchanged at 4%.
• Retains Statutory Liquidity Ratio at 21.5%.
• Estimates GDP growth at 7.8% in FY’16, up from 7.5% in FY’15 .
• Forecasts CPI inflation at 5.8 pc by March 2016.
• 100% CPI inflation to dip to 4% in August 2015.
• Hailstorms in March affected 17% of the rabi crop sown area .
• Future rate cuts will depend on interest rate reduction by banks.
• India better prepared to deal with volatility post US Federal Reserve rate action.
• State cooperative banks to be allowed to set up off-site/ mobile ATMs without prior approval from RBI.
• RBI to formulate scheme for market making by primary dealers in semi-liquid and illiquid G-Secs.

By: Vishal