Despite intense pressure and widespread anticipation, the Raghuram Rajan-led Reserve Bank of India (RBI) has decided to keep the policy rate unchanged.
In doing so, it has indicated that it is prepared for a wait-and-watch approach.
Perhaps, it has chosen to await the maiden budget of the Narendra Modi Government at the Centre so as to get a sense of direction of the new fiscal managers.
The Reserve Bank of India (RBI) has kept the policy repo rate under the liquidity adjustment facility (LAF) unchanged at 8.0 per cent. It has also decided to keep the cash reserve ratio (CRR) of scheduled banks unchanged at 4.0 per cent of net demand and time liabilities (NDTL).
However, it has reduced the statutory liquidity ratio (SLR) of scheduled commercial banks by 50 basis points from 23.0 per cent to 22.5 per cent of their NDTLwith effect from the fortnight beginning June 14. The RBI has also reduced the liquidity provided under the export credit refinance (ECR) facility from 50 per cent of eligible export credit outstanding to 32 per cent with immediate effect. However, it has introduced a special term repo facility of 0.25 per cent of NDTL to compensate fully for the reduction in access to liquidity under the ECR with immediate effect.
The apex bank has also decided to continue to provide liquidity under 7-day and 14-day term repos of up to 0.75 per cent of NDTL of the banking system.
Consequently, the reverse repo rate under the LAF will remain unchanged at 7.0 per cent, and the marginal standing facility (MSF) rate and the Bank Rate at 9.0 per cent.
