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बेसिक इंग्लिश का दूसरा सत्र (कक्षा प्रारंभ : 22 अक्तूबर, शाम 3:30 से 5:30)
Monetary Policy Review: RBI Cuts Repo Rate by 25 Basis Points
Jun 03, 2015

The Reserve Bank of India (RBI) cut the Repo rate by 25 basis points to 7.25% from 7.5% in the central bank's monetary policy review on 2 June. The central bank kept the Cash Reserve Ratio (CRR) unchanged at 4%. On the basis of an assessment of the current and evolving macroeconomic situation, it has been decided to:

  • Reduce the policy repo rate under the Liquidity Adjustment Facility (LAF) by 25 basis points from 7.5 per cent to 7.25 per cent with immediate effect.

  • Keep the Cash Reserve Ratio (CRR) of scheduled banks unchanged at 4.0 per cent of Net Demand and Time Liabilities (NDTL).

  • 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.

  • Continue with overnight/term variable rate repos and reverse repos to smooth liquidity.

Consequently, the Reverse Repo Rate under the LAF stands adjusted to 6.25 per cent, and the Marginal Standing Facility (MSF) rate and the Bank Rate to 8.25 per cent.

Key Findings

  • Since the first bi-monthly monetary policy statement of 2015-16 issued in April 2015, incoming data suggest that the global recovery is still slow and getting increasingly differentiated across regions.

  • Global financial markets have also been volatile, with risk-on risk-off shifts induced by changing perceptions of monetary policies in the advanced economies.

  • The Central Statistics Office has revised downwards its estimate of India’s Gross Value Added (GVA) at basic prices for 2014-15 by 30 basis points from the advance estimates.

  • Domestic economic activity remains moderate in Q1 of 2015-16.

  • Industrial production has been recovering, but it is uneven.

  • Leading indicators of services sector activity are emitting mixed signals.

  • Retail inflation measured by the Consumer Price Index (CPI) decelerated for the second month in a row.

  • Fuel inflation rose for the fourth successive month to a twelve-month high.

  • Liquidity conditions eased in April 2015 after the tightness in the second half of March 2015 on account of advance tax outflows and financial year-end behaviour of banks.

  • Merchandise export growth has weakened steadily since July 2014 and entered into contraction from January 2015 through April, with a recent shrinking of even volumes exported.


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