First Bi-monthly Monetary Policy Statement, 2016-17

Posted on:05 Apr 2016 18:10:55
First Bi-monthly Monetary Policy Statement, 2016-17
05 April 2016 Current Affairs: Reserve Bank of India (RBI) today cuts the Repo rate under the liquidity adjustment facility (LAF) by 25 basis points to 6.5% in its first bi-monthly monetary policy review for the 2016-17 fiscal and kept the Cash Reserve Rate (CRR) unchanged. Repo Rate is the rate at which banks borrow from the central bank. One basis point is one hundredth of a percentage point. The repo rate now stands at 6.5%, the lowest it has been since March 2011. With this, Home, auto and other loans are set to become cheaper.The RBI, though projected GDP growth to at about 7.6% for FY 2017. citing both upsides from a good monsoon, higher consumer demand from the 7th Pay Commission and OROP for ex-servicemen and downsides from sluggish investment. R G Rajan welcomed the government move to amend the RBI Act to create a monetary policy committee, saying it will further strengthen the policy's credibility. He also welcomed the government's adherence to the path of fiscal consolidation, calling it as a commendable commitment this will support the disinflation process going forward. Following are the highlights of RBI’s first bi monthly monetary policy statement, 2016 17:Repo rate cut by 0.25% to 6.50%,Reverse repo hiked by 0.25% to 6%,Cash reserve ratio or CRR unchanged at 4%,Minimum daily cash maintenance by banks with RBI cut by 5%,MSF rate cut by 0.75% to lower banks’ borrowing cost,Policy to remain accommodative going forward,Pegs 2016—17 growth forecast at 7.6%,Expects inflation at around 5%,Cut in small savings rate, MCLR introduction to improve monetary policy transmission,Government adhering to fiscal consolidation path will help lower inflation,7th Pay Commission award to put upward pressure of up to 1.5% on inflation,Proposes custodian banks; banks focusing on wholesale and long term financing,Second bi—monthly monetary policy on June 7

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