RBI’s Third Bi-Monthly monetary policy Review 2015 Check August 4th RBI’s Third Bi-Monthly policy analysis

In its Third Bi-monthly journal of monetary policy, the Reserve Bank of India (RBI) today maintained its interest rates unchanged. Earlier, June 2, 2015, in its second bimonthly review of the monetary policy, the RBI cut its repo rate by 25 basis points to 7.25 percent after lowering by the same amount in January and March. But this time, the RBI has not made changes in policy rates. The reserve ratio is 7.25 percent, the reverse ratio is 6.25 percent and cash reserve ratio (CRR) and statutory liquidity ratio (SLR) to 4 per cent and 21.5 per percent, respectively.

Highlights of the third review of monetary policy of the RBI.

  • Repo policy rate under the liquidity adjustment facility (LAF) unchanged at 7.25 percent
  • Cash reserve ratio (CRR) regular banks unchanged at 4.0 percent of net demand and time
  • liability (NDTL)
  • Continue to provide cash to a pension at 0.25 percent of the bank-wise NDTL to LAF repo rate and term repurchase liquidity of 14 days and longer term rest until 0.75 NDTL percent of the banking system through auctions
  • Continue with the daily rest floating rate and reverse repo to smooth liquidity.
  • The economic recovery is still in progress
  • Hardening of inflation, excluding food and fuel, more worryingly
  • Keeps growth target at 7.6 percent for 2015-16
  • RBI said banks have passed on an interest rate of 0.3% on average against its cut rate cut of 0.75% since January
  • The infusion in PSBs government capital to help loan growth and transmission of interest rate cuts and the liquidity facility

Reserve Bank of India will announce its third bi-monthly review of Monetary Policy for the year 2015-16 today. Hours before RBI governor Raghuram Rajan, announced the third bi-monthly review of the monetary policy, a senior Finance Ministry said the central bank should not hesitate to cut interest rates only on inflation fears. The government said he wanted to bring down the cost of borrowing and RBI reducing its policy rate will be a trigger for such an initiative will stimulate investment and growth. The official said wholesale inflation index, WPI is in negative territory since November and the international oil prices, the biggest damper on domestic commodity prices are lowest for several years, giving comfort to developing economies like India. Bankers believe, however, RBI will be conservative in reducing rates further as retail inflation, its peak more concern, continues to reign to eight months at 5.4 percent in June. International crude oil prices have halved to 51-52 dollars per barrel over the past year, leading to several cycles down retail prices of gasoline and diesel, a key component of inflation . India Inc pitching for a rate cut due to low inflation and wholesale slowdown in industrial growth.

Investors also hope for a rate cut. According to experts, there are three aspects that are likely to impact

The thought process RBI governor when he takes a call on whether to further reduce rates: monsoon, global crude oil prices and the perceived weakness of the rupee


Click here for  RBI Third Bi-monthly journal review 2015