Resisting intense pressures from many quarters, the Reserve Bank of India (RBI) has decided to keep the key policy rates unchanged. The RBI decision follows a careful assessment of the current situation, and is in line with the stance taken by it in the past few days to come down heavily on the speculations in the foreign exchange market.
The RBI, on Tuesday, decided on the following:
- To keep the repo rate under the liquidity adjustment facility (LAF) unchanged at 7.25 per cent.
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- The reverse repo rate under the LAF, determined with a spread of 100 basis points below the repo rate, will, as a consequence, remain at 6.25 per cent.
- The Marginal Standing Facility (MSF) Rate will be unchanged at 300 basis points above the repo rate at 10.25 per cent.
- The Bank Rate will be 10.25 per cent.
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- The cash Reserve Ratio (CRR) of scheduled banks has been retained at 4.0 per cent of their net demand and time liabilities (NDTL).
- The RBI has cut the GDP forecast for FY’14 to 5.5 per cent from 5.7 per cent earlier
- Rupee depreciation a threat to inflation
- Tight liquidity measures to be rolled back once Rupee stabilises
- To use all instruments to keep March-end inflation at 5 per cent
- Policy measures aimed at addressing risks to macroeconomic stability from external sector
- Biggest threat to macroeconomic stability stems from the external sector
- Immediate structural steps needed to contain the current account deficit
- International crude oil prices are firming up
- Growth, inflation to determine future policy actions
- This is RBI Governor D Subbarao’s last policy before expiry of his five year term
- Next mid—quarter review of policy on September 18; second quarter policy review on October 29.
(with inputs from PTI)