Finance

RBI keeps key interest rates unchanged

RBI keeps key interest rates unchanged

The central bank's six-member Monetary Policy Committee (MPC) in its bi-monthly Monetary Policy Statement, noted that the April-June GDP growth is seen at 7.1 percent, and the July-September GDP growth is seen at 7.4 percent. The reverse repo rate under the LAF remains at 5.75%, and the marginal standing facility (MSF) rate and bank rate at 6.25%.

This is the fourth policy review in sequence in which the MPC has kept the Repo Rate unchanged.

For the second half of the year, it expects CPI inflation to be around 4.4 per cent, including the impact of higher house rent allowance for central government employees, compared with its earlier forecast of 4.5 per cent to 4.6 per cent.

With 10 big mobile application- based payment services alone enjoying over 1.5 crore installations the RBI in its monetary policy report on Thursday asked all payment system operators to store data related to payments and users only in India. In the last three policy meetings, the Reserve Bank has maintained the status quo on the interest rates front.

Rajnish Kumar, Chairman, State Bank of India, said: "More than the RBI decision to keep rates unchanged, the tone of the policy is a pleasant surprise for the market".

Additionally, export growth has started decelerating in recent months due to several factors like delays in getting goods and services tax refunds, shrinkage of trade finance, loss of competitiveness due to overvaluation of currency and rising trade protectionism (which was mentioned by the MPC as well).

Patel added that the aggregate demand is expected to strengthen this year.

On the liquidity in the system, another deputy governor Viral Acharya said the surplus, built up following note ban and forex inflows until last August, continued to decline over the last six months with corresponding rise in currency in circulation.

Firstly, with the sharp moderation in food prices in February-March, the inflation trajectory in H1:2018-19 is expected to be lower than the projection in the February statement, despite a likely reversal in food prices in H1. Eight infrastructure sectors grew by 5.3 percent in February, mainly helped by a robust performance of refinery products, fertiliser and cement segments.The eight infrastructure sectors - coal, crude oil, natural gas, refinery products, fertilisers, steel, cement and electricity - had grew by just 0.6 percent in February 2017. Also ambitious government projects like healthcare insurance and hike in MSP for agricultural produce will need higher government reserves. GDP inching to 7.2% and now is projected to 7.3 in the coming Financial Year. Changes in the repo rate affect bond yields and influence borrowing costs and loan rates.


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