Highlights of Sixth bi-monthly monetary policy review (2016 – 17)
The Monetary Policy Committee (MPC)
of the Reserve Bank of India (RBI) headed by RBI Governor Urjit Patel has kept
the key policy rates unchanged. It was
central bank’s sixth bi-monthly and last policy for the financial year 2016-17
and overall the third by the MPC.
All six members of the MPC voted in
favour of holding rates. Besides, RBI also changed its stance from
accommodative to neutral. It also lowered GDP growth forecast for the current
fiscal to 6.9%. However the apex bank expects a rebound in GDP growth to 7.4%
in 2017-18.
Following are the highlights of the sixth bi-monthly monetary
policy announced by RBI:
Economic growth for FY17 lowered to 6.9%; RBI pegs it
at 7.4% in 2017—18.
Growth is expected
to recover sharply in 2017—18.
Retail inflation in Q4
likely to be below 5%
Inflation projected in the
range of 4—4.5% in the first half of 2017—18 and 4.5—5% in the second half.
Upside risks to inflation — rise in crude oil
prices, volatility in exchange rate, and fuller effect of the 7th Pay Panel.
Global growth projected to pick up modestly in 2017.
Global trade remains subdued due to increasing
tendency towards protectionist policies.
RBI changes policy stance from ‘accommodative’ to
’neutral’
Monetary Policy Committee (MPC) shifts policy stance
to neutral keeping in mind transitory effect of demonetisation.
Surplus liquidity to
fall with progressive remonetisation; abundant liquidity with banks may persist
in early 2017—18.
High frequency indicators point to subdued activity
in services sector, automobile sales, domestic air cargo, railway freight
traffic, and cement production.
Steel consumption, port
traffic, international air freight, foreign tourist arrivals weathered effect
of demonetisation.
Excluding food and fuel, inflation has been
unyielding at 4.9% since September.
Makes case for faster resolution of NPAs and
hastening recapitalisation of banks for lower lending rates.
The next meeting of the
Monetary Policy Committee on April 5-6
Policy Rates:
- Repo rate under
the liquidity adjustment facility (LAF): Unchanged at 6.25 percent.
- Reverse repo
rate under the LAF: Unchanged at 5.75 per cent.
- Marginal
standing facility (MSF): Unchanged at 6.75 per cent.
- Bank Rate: Unchanged at 6.75 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 20.75 per cent.
