First Bi-monthly Monetary Policy Statement, 2015-16

First Bi-monthly Monetary Policy Statement, 2015-16

The Reserve Bank of India (RBI), on 7th April 2015, kept the short-term policy rate (repo) unchanged at7.50 per cent.With the banks not transmitting to customers its earlier unscheduled 50 basis points cut in twin-doses, the Reserve Bank has now decided to await ‘more convincing data’ on inflationary pressures.

Monetary and Liquidity Measures:

• On the basis of an assessment of the current and evolving macroeconomic situation, it has been decided to:keep the policy repo rate under the liquidity adjustment facility (LAF) unchanged at 7.5 per cent;
• keep the cash reserve ratio (CRR) of scheduled banks unchanged at 4.0 per cent of net demand and time liability (NDTL); and
• continue to provide liquidity under overnight repos at 0.25 per cent of bank-wise NDTL at the LAF repo rate and liquidity under 7-day and 14-day term repos of up to 0.75 per cent of NDTL of the banking system through auctions; and
• continue with daily variable rate repos and reverse repos to smooth liquidity.

Consequently, the reverse repo rate under the LAF will remain unchanged at 6.5 per cent, and the marginal standing facility (MSF) rate and the Bank Rate at 8.5 percent

RBI pushes banks for lower lending rate:

The Reserve Bank of India (RBI) held interest rates steady on 7th April 2015, while boosting banks' liquidity in a bid to persuade them to lower lending rates after they failed to pass on the benefits of the last official rate cut three weeks ago.

SBI, HDFC Bank, ICICI Bank cut lending rate; home, auto loans to get cheaper:

Nudged by the Reserve Bank of India, leading banks, State Bank of India, ICICI Bank and HDFC Bank, on Tuesday cut their lending rates. While SBI and HDFC Bank cut rates by a token 0.15 per cent, ICICI Bank slashed its lending rate by 0.25 per cent.The action of the two banks could have a snowballing effect forcing others to follow suit, a move that can bring relief to corporate and retail borrowers including of home and auto loans.

Finally, the Reserve Bank would watch for signs of normalisation of the U.S. monetary policy.

1. Accommodative stance’ of monetary policy will be maintained

2. The outlook for growth is improving gradually

3. Output growth for 2015-16 is projected at 7.8 per cent