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RBI Fourth Bi-monthly Policy 2017-18

RBI Fourth Bi-monthly Policy 2017-18: The Reserve Bank today kept interest rate unchanged as was widely expected in view of upward trend in inflation even as it cut the growth forecast to 6.7 per cent for the current fiscal. 

Consequently, the repo rate, at which it lends to banks, will stand at 6 percent.

The reverse repo, at which RBI borrows from banks will continue to be at 5.75 percent, it said at the fourth bi-monthly policy review.
In its last review in August it had slashed the benchmark lending rate by 0.25 percentage points to 6 percent, the lowest in 6 years.

The six-member monetary policy committee voted 5:1 for the decision, with only Ravindra Dholakia voting for a 0.25 percent reduction in rates.

The Reserve Bank of India (RBI) said that after a record low in June, inflation is trending up and estimated the headline number to touch 4.6 percent by the March quarter.

The remaining policy statements would be released by RBI as stated below - 

Policy Statement Dates of Release
First Bi-monthly Monetary Policy Statement for 2017-18 6th April 2017
Second Bi-monthly Monetary Policy Statement for 2017-18 7th June 2017
Third Bi-monthly Monetary Policy Statement for 2017-18 2nd August 2017
Fifth Bi-monthly Monetary Policy Statement for 2017-18 6th December 2017
Sixth Bi-monthly Monetary Policy Statement for 2017-18 7th February 2018

RBI Fourth Bi-Monthly Monetary Policy 2017-18: Highlights

The Reserve Bank of India in its fourth Bi-Monthly statement 2017-18 has made the following announcements -
  • Key policy rate kept unchanged at 6 percent.
  • Reverse repo rate unchanged at 5.75 percent.
  • Cuts economic growth forecast to 6.7 percent from 7.3 percent for FY'18
  • Projects inflation at 4.2-4.6 percent in the second half.
  • GST implementation rendered prospects for the manufacturing sector uncertain in the short term.
  • Focus on keeping headline inflation close to 4 percent on a durable basis
  • RBI continues to work towards the resolution of stressed corporate exposures in bank balance sheets.
  • Recent structural reforms improving business environment, transparency and increasing formalisation of the economy.
  • Suggests concerted drive to restart stalled investment projects, enhance ease of doing business, including implification of the GST to boost growth.
  • Suggests rationalisation of "excessively high" stamp duties charged by states, faster rollout of affordable housing programme.
  • Next MPC meeting on 5-6 December.

Some common terms of the Policy rates - 

  1. Repo Rate  -It is the rate at which RBI lends money to commercial banks.
  2. Reverse Repo rate - It is the rate at which RBI borrows money from commercial banks.
  3. Cash Reserve Ratio (CRR) - The share of net demand and time liabilities (deposits) that banks must maintain as cash balance with the Reserve Bank.
  4. Statutory Liquidity Ratio (SLR) - The share of net demand and time liabilities (deposits) that banks must maintain in safe and liquid assets, such as, government securities, cash and gold.
  5. Bank Rate - It is the rate at which the Reserve Bank is ready to buy or rediscount bills of exchange or other commercial papers for long term.
  6. Marginal Standing Facility Rate (MSF) - The rate at which the scheduled banks can borrow funds from the RBI overnight, against the approved government securities is termed as MSF.

Current Policy Rates-

Policy Repo Rate 6.00 %
Reverse Repo Rate 5.75 %
Marginal Standing Facility Rate 6.25 %
Bank Rate 6.25 %

Reserve Ratios-

CRR 4 %
SLR 19.5% (from October 14 fortnight)

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