Reserve Bank of India (RBI) announced Bi-Monthly Monetary Policy by keeping all key rates - repo rate, CRR, SLR, reverse repo rate - unchanged. This is the fourth consecutive time that the RBI has kept key interest rates unchanged.
While admitting that the 8% CPI target for January 2015 now looks more achievable. Based on the assessment of the current and evolving macroeconomic situation,the following changes has been taken:
Reaction from Mr. Rohit Gadia, Founder & CEO, CapitalVia Global Research:
- The Repo rate under the liquidity adjustment facility (LAF) unchanged at 8.0 per cent
- The cash reserve ratio (CRR) of scheduled banks unchanged at 4.0 per cent of net demand and time liabilities (NDTL)
- Reduced the Statutory Liquidity Ratio under the export credit refinance (ECR) facility from 32 per cent of eligible export credit outstanding to 15 per cent with effect from 10 October 2014
- 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
- Continue with daily one-day term repos and reverse repos to smooth liquidity
- The reverse repo rate under the LAF remained unchanged at 7.0 per cent and the marginal standing facility (MSF) rate and the Bank Rate at 9.0 per cent.
“Ahead of RBI policy market was trading with the mix sentiments and was volatile for a while, after the declaration of no change in key policy rates. RBI today in its fourth bi-monthly monetary policy review has come out with no rate change and delivered what market was expecting from the central bank, and we think the main reason behind this is that RBI is holding the job of maintaining the Credibility of the processes like anti-inflation process while keeping in the consideration quite a lot of currency pressure. RBI has set a glide path for CPI inflation at 8 per cent by January 15 and 6 per cent by January 2016. So RBI can raise interest rate even in the next review if they see that CPI numbers are going out of ease.”