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RBI Keeps Rate Unchanged, Downgrades Growth Forecast

RBI Keeps Rate Unchanged, Downgrades Growth ForecastRBI Keeps Rate Unchanged, Downgrades Growth Forecast

The Reserve Bank of India kept its policy rate unchanged at a near seven-year low of 6% on Wednesday, despite a sharp slowdown in economic growth, after a surge in consumer inflation to a five-month high.

The central bank has also cut its growth forecast for the year. “The projection of real gross value added growth for 2017-18 has been revised down to 6.7% from the August 2017 projection of 7.3%,” the RBI said in a statement, NDTV reported.

However, the RBI cut the statutory liquidity ratio requirement for banks by 50 basis points to 20% from 19.50%, a move which was cheered by the stock markets as it will give more resources to banks to lend. SLR is the percentage of total deposit that banks are required to hold with them in the form of gold, government approved securities before extending credit to their customers.

All but three of 60 analysts polled by Reuters had expected the RBI to keep the repo rate steady. India Inc had called for a sharp cut in interest rate for boosting the economic growth rate.

Five members of the RBI’s monetary policy committee voted Wednesday to keep rates unchanged, with one voting for at least a 25 bps cut. The RBI also kept the reverse repo rate unchanged at 5.75%.

At its previous meeting in August, the RBI had lowered the repo rate by 25 basis points to a seven-year low of 6%. It had then projected GVA growth of 7.3% for 2017-18, which it revised downward to 6.7% today.

Gross value added ( GVA) is a measurement of economic growth which strips away the effects of taxes and subsidies.

 

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