The Reserve Bank of India (also Known as the Central Bank of India or Bankers’s Bank) has released the Second bi-monthly Policy Statement for the current fiscal year 2017-18.
Based on the assessment of the Monetary Policy Committee of Reserve Bank of India, the second Bi-Monthly Policy was announced by RBI on 7th June 2017.
Monetary Policy Committee of RBI consists of six members headed by Dr. Urjit Patel, Governor of RBI. While five members of the Committee were in favour of keeping the Repo Rates unchanged at 6.25 per cent, Ravindra H Dholakia was against the majority proposal.
Key Changes: Repo Rate, Reverse Repo Rate Kept Unchanged
Based on an assessment of the current and evolving macroeconomic situation, the Monetary Policy Committee (MPC) decided the following changes.
Repo Rate kept unchanged at 6.25 percent.
Reverse Repo Rate remains unaltered at 6.0 per cent.
Statutory Liquidity Ratio faced a cut from 0.5% to 20%.
Marginal Standing Facility (MSF) rate and the Bank Rate stands at 6.50 per cent.
Key Rates after Second Bi-Monthly Policy 2017-18
|S. No.||Instruments||Past Rates||Current Rates|
|1.||Repo Rate||6.25%||6.25% (Unchanged)|
|2.||Reverse Repo Rate||6%||6% (Unchanged)|
|3.||Cash Reserve Ratio (CRR)||4%||4% (Unchanged)|
|4.||Bank Rate||6.75%||6.50% (Reduced by 25 basis points)|
|5.||Marginal Standing Facility (MSF)||6.75%||6.50% (Reduced by 25 basis points)|
|6.||Statuary Liquidity Ratio (SLR)||20.75%||20.50 % (20% from 24th June 2017)|
Read the details of Key Policy Rates – Important Banking Terms!
Key Highlights of the Second Bi-Monthly Policy
The following are the highlights of the second bi-monthly monetary policy for 2017-18 as announced by the RBI:
RBI cuts the economic growth projection to 7.3 percent for the current fiscal from 7.4 per cent earlier.
RBI projects the inflation in 2-3.5 percent range for first half of 2017-18 and 3.5-4.5 percent for the second
The Inflation data which is to be released in August will give the indication of the impact of Goods and Services Tax (GST) on prices.
The Central Bank raised concerns over the possibility of fiscal slippages due to the farm loan waivers.
The 7th Pay Commission allowances, geopolitical, financial risk pose upside risk to inflation.
The current state of Indian Economy and Indian Banking System need to revive private investment, restore banking sector health, remove infrastructure bottleneck.
Retail inflation, based on Consumer Price Index (CPI), dropped to a multi-year low at 2.99% in April over last year, mainly due to lower cost of food items, including pulses and vegetables. CPI inflation was 5.47% in April 2016.
At the same time, inflation based on the wholesale price index slipped to a four-month low of 3.85 per cent in April as both food articles and manufactured items showed cooling in prices.
The decision of MPC is consistent with a neutral stance in the monetary policy.
Crude prices fell to a five-month low in the early May.
The projection of real GVA growth for 2017-18 has accordingly been revised 10 bps downwards from the April 2017 projection to 7.3 per cent.
The surplus liquidity in the banking system post-demonetization was drained by the ramping up of new currency in circulation by Rs 1.5 trillion in April and May.
To be Noted
The minutes of the MPC’s meeting will be published on 21st June 2017.
The next meeting of the MPC is scheduled on 1st and 2nd August 2017.
In this article, we have summed up all the important highlights of RBI Second Bi-monthly Policy for 2017-18 fiscal year.
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