No rates cuts; RBI keeps key rates unchanged
Updated: Dec 01, 2015 11:59:07am
Mumbai, Dec 1 (KNN) After slashing the key rates by 50 basis points in the previous monetary policy review in September, the Reserve Bank today decided to keep the key rates unchanged in its Fifth Bi-monthly Monetary Policy Statement, 2015-16.
“On the basis of an assessment of the current and evolving macroeconomic situation, it has been decided to keep the policy repo rate under the liquidity adjustment facility (LAF) unchanged at 6.75 per cent,” said RBI.
The apex bank also decided to keep the cash reserve ratio (CRR) of scheduled banks unchanged at 4.0 per cent of net demand and time liability (NDTL); 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 continue with daily variable rate repos and reverse repos to smooth liquidity.
“Consequently, the reverse repo rate under the LAF will remain unchanged at 5.75 per cent, and the marginal standing facility (MSF) rate and the Bank Rate at 7.75 per cent,” RBI said.
Since the fourth bi-monthly statement of September 2015, global growth continues to be weak. Global trade has slowed further with waning demand and oversupply in several primary commodities and industrial materials, the central bank assessed.
On the domestic front, provisional estimates of gross value added (GVA) at basic prices for Q2 of 2015-16 rose on the back of acceleration in industrial activity. Other indicators suggest the economy is in the early stages of a recovery, though with some areas of continued weakness.
RBI said, “The Index of Industrial Production picked up in the second quarter. Early results of the Reserve Bank’s order books, inventories and capacity utilisation survey indicate that there was robust growth in new manufacturing orders in the second quarter, and finished goods inventories declined while raw materials inventories increased. Not all indicators, however, are positive.”
The sixth bi-monthly monetary policy statement will be announced on Tuesday, February 2, 2016. (KNN Bureau)
“On the basis of an assessment of the current and evolving macroeconomic situation, it has been decided to keep the policy repo rate under the liquidity adjustment facility (LAF) unchanged at 6.75 per cent,” said RBI.
The apex bank also decided to keep the cash reserve ratio (CRR) of scheduled banks unchanged at 4.0 per cent of net demand and time liability (NDTL); 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 continue with daily variable rate repos and reverse repos to smooth liquidity.
“Consequently, the reverse repo rate under the LAF will remain unchanged at 5.75 per cent, and the marginal standing facility (MSF) rate and the Bank Rate at 7.75 per cent,” RBI said.
Since the fourth bi-monthly statement of September 2015, global growth continues to be weak. Global trade has slowed further with waning demand and oversupply in several primary commodities and industrial materials, the central bank assessed.
On the domestic front, provisional estimates of gross value added (GVA) at basic prices for Q2 of 2015-16 rose on the back of acceleration in industrial activity. Other indicators suggest the economy is in the early stages of a recovery, though with some areas of continued weakness.
RBI said, “The Index of Industrial Production picked up in the second quarter. Early results of the Reserve Bank’s order books, inventories and capacity utilisation survey indicate that there was robust growth in new manufacturing orders in the second quarter, and finished goods inventories declined while raw materials inventories increased. Not all indicators, however, are positive.”
The sixth bi-monthly monetary policy statement will be announced on Tuesday, February 2, 2016. (KNN Bureau)
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