RBI keeps repo Rates unchanged

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India’s monetary-body RBI on Thursday kept the repo rate unchanged at 6 percent. The six-member Monetary Policy Committee led by RBI governor Urijit Patel, following its first bi-monthly meeting for the new fiscal, noted recovery in growth and closing in the output gap.

Urijit Patel started the two-day meet on Wednesday.

Chetan Ghate, Ravindra H Dholakia, Pami Dua, Viral V Acharya and Urijit R Patel voted (5:1) in favor of the monetary policy decision. Only Micheal Debabrata Patra voted for an increase in the policy rate of 25 basis points.

The central bank in its new plan has lowered inflation projection of this financial year to 4.7 to 5.1 percent in the first half and 4.4 percent during the latter half.

It had last reduced the benchmark lending rate 6-year-low to 6 percent (0.25 percent low) last August.

“The MPC decided to keep the policy repo rate on hold and continue with the neutral stance. The MPC reiterates its commitment to achieving the medium-term target for headline inflation of 4 percent on a durable basis,” said the first bi-monthly monetary policy for 2018-19.

The repo rate, at which the Reserve Bank of India lends short-term money to other banks, will continue to stay at 6 percent while reverse repo rates, at which it borrows from other banks & absorbs less liquidity, will stay at 5.75 percent.

Domestic markets continued to rise above 1.5 percent after the policy meeting.

Banking shares of SBI, Bank of Baroda, HDFC Bank, Yes Bank and ICICI were trading higher on BSE after the policy announcement.

Addressing the media, RBIgovernor Urijit Patel said, “While inflation came down, there are some uncertainties like revised MSP (Minimum Support Price) formula and fiscal slippages. So, a neutral stance has been maintained.”

“Normal monsoon and effective food supply management by the government could mitigate inflation risks coming from rising crude,” he added.

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