Tuesday 5 August 2014

RBI keeps key rates unchanged, cuts SLR by 50 bps

The Reserve Bank of India (RBI) in its third bi-monthly monetary policy statement for 2014-15 kept the repo rate unchanged at 8%. The reverse repo rate was kept unchanged at 7% and Cash Reserve Ratio ( CRR) was maintained at 4%. 

The SLR was cut by 50 bps to 22%. Inflation has eased but the RBI has factored the likely risks to inflation going forward. 

Prices of some of the food articles like tomato, onion, potatoes are still quite above normal. With monsoon being below normal, there is a fear that price situation, especially food inflation, may further deteriorate in the coming days. Monsoon deficiency stood at 23 per cent in at the end of July. 

In the last policy review in June, RBI chose not to tinker with the policy rate. It was the second consecutive time that RBI Governor Raghuram Rajan kept interest rates unchanged. The repo rate, at which the RBI lends to banks, was retained at 8 per cent and the cash reserve ratio (CRR) was kept unchanged at 4 per cent. 

The statutory liquidity ratio (SLR), the mandatory amount of bonds lenders must park at the RBI, was cut by 0.5 per cent to 22.5 per cent of their net demand and time liabilities (NDTL) with effect from June 14. 



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