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Bi-monthly Review of Fiscal Policy
Feb 05, 2016

On the basis of an assessment of the current and evolving macro-economic situation, the Reserve Bank of India (RBI) on February, 2 maintained status quo on key interest rates in its 6th bi-monthly monetary policy review.

Key Features

  • To keep the policy Repo rate under the Liquidity Adjustment Facility (LAF) unchanged at 6.75 per cent.

  • To keep the Cash Reserve Ratio (CRR) of scheduled banks unchanged at 4 per cent of Net Demand and Time Liability (NDTL).

  • To continue to provide liquidity under overnight repos at 0.25 per cent of bank-wise NDTL at the LAF repo rate and liquidity under 14-day term repos as well as longer term repos of up to 0.75 per cent of NDTL of the banking system through auctions.

  • To continue with daily variable rate repos and reverse repos to smooth liquidity. 

  • Consequently, the reverse repo rate under the LAF will remain unchanged at 5.75 per cent, and the marginal standing facility (MSF) rate and the Bank Rate at 7.75 per cent. 

  • The RBI had slashed the policy Repo rate by 125 basis points in 2015. 

  • This was 6th and final monetary policy for the current fiscal. 

The Reserve Bank Governor, Raghuram Rajan hinted at accommodative stance, saying with inflation moving closer to the target there would be more room for rate cut to support growth. 

Structural reforms in the forthcoming Union Budget that boost growth while controlling spending will create more space for monetary policy to support growth, while also ensuring that inflation remains on the projected path of 5 per cent by the end of 2016-17.

Inflation has evolved closely along the trajectory set by the monetary policy stance. With unfavourable base effects on the ebb and benign prices of fruits and vegetables and crude oil, the January 2016 target of 6 per cent should be met.

The RBI Governor said the Indian economy is being viewed as a beacon of stability because of the steady disinflation, a modest current account deficit and commitment to fiscal rectitude.


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