After deliberating on the issue of repo rate, the Reserve Bank of India’s Monetary Policy Committee (MPC) has decided to keep the rates unchanged at 6.25%.
This decision was arrived upon during the Central Bank’s first bi-monthly policy review for FY18, which was presided over by Governor Urjit Patel and several other key RBI officials.
Several expert reports are of the impression that the reason for keeping the rates unchanged was mainly due to fears over rising inflation figures. In simpler terms, repo rate is the rate at which the RBI lends capital to banks for a short term.
However, the bank decided to hike the reverse repo rate to 6% from the previous 5.25% with a view to getting all the extra reserve cash away from banks. Also, the committee decided to keep the Cash Reserve Ratio (CRR) at 4%.
Apart from this, the central bank also revised the Marginal Standing Facility and cut it by 25 basis points from 6.75% to 6.50%. This is basically the rate at which banks can borrow funds overnight when they have exhausted their liquidity.
With several surveyors predicting a GDP growth of 6.75% – 7.5%, experts are positive about reaching such numbers if such measures are taken.