RBI keeps policy rates unchanged in 3rd bi-monthly monetary policy review

August 9, 2016

The Reserve Bank of India (RBI) in its third bi-monthly monetary policy review for year 2016-17 has maintained status quo in key policy interest rate.
It was last bi-monthly monetary policy review of RBI Governor Raghuram Rajan who will step down in September 2016 after completing his term.
Policy Rates

Repo rate under the liquidity adjustment facility (LAF): unchanged at 6.50 per cent.
Reverse repo rate under the LAF: unchanged at 6.0 per cent.
Marginal standing facility (MSF) rate: 7 per cent.

Reserve Ratios

Cash Reserve Ratio (CRR) of scheduled banks: Unchanged at 4.0 per cent of net demand and time liability (NDTL).
Statutory Liquidity Ratio (SLR): Unchanged at 21 per cent.

Comment
The policy interest rates were kept unchanged while maintaining an accommodative policy stance on basis of an assessment of the current and evolving macroeconomic situation in country.
Other highlights

RBI said risks to the inflation target of 5% for March 2017 continue to be on the upside.
The passage of the Goods and Services Tax (GST) Bill augurs well for the growing political consensus for economic reforms.
Timely implementation of GST will be challenging but it will raise returns to investment across much of the economy.
It will also even while strengthening government finances over the medium-term. This should boost business sentiment and eventually investment.

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