RBI to announce policy rates today

RBI to announce policy rates today

RBI to announce policy rates today

Reserve Bank of India Governor Urjit Patel and his monetary policy committee retained the benchmark repurchase rate at 6 percent on Thursday, as predicted by all 42 economists in a Bloomberg survey. The key Repo rate has been kept at 6 and other key parameters remaining the same has been widely expected while 5 out 6 members of MPC were neutral.

Five of six members on the monetary policy committee (MPC) voted for a hold, while one wanted to raise the repo rate. The headline inflation after surging to a concerning 5.2 percent in December a year ago, cooled off to 5.07 percent in January and further to 4.4 percent in February.

Chanda Kochhar, ICICI Bank MD and CEO, said: "The significant positive in the monetary policy was the downward revision of inflation projections. Overall the MPC assessed risks to inflation is tilted to the upside", he said.

"Ongoing normalisation of interest rates in the U.S., higher global crude oil prices, and the looming threat of escalation in global trade war warranted a cautious approach".

"This is also reflected in a pick-up in credit offtake in recent months".

Investment banks such as Goldman Sachs Group Inc. expect India to grow at 7.6 percent in the year started April 1, amid rising demand in the economy.

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"Furthermore, even as global growth and trade have been strengthening, rising trade protectionism and financial market volatility could derail the ongoing global recovery".

He also pointed that the format of the financial statement as prescribed in schedule three of banking regulation act is not amenable to reporting financial statements under Ind AS and therefore the RBI has requested the government to amend the schedule and that was under consideration.

On the liquidity in the system, another deputy governor Viral Acharya said the surplus, built up following note ban and forex inflows until last August, continued to decline over the last six months with corresponding rise in currency in circulation. Normal monsoon and effective food supply management was seen as mitigating factors.

The MPC said it saw inflation in the second half of this fiscal year at 4.4, but that was without taking into account any increase from higher housing allowances to government employees. In view of this, as also the level of preparedness of many banks, it has been made a decision to defer implementation of Ind AS by one year by when the necessary legislative changes are expected, " the RBI said.

On the real estate sector outlook, which has aligned to the government's ambitions, Nair said the sector was looking for some encouragement that would move the "needle towards accelerated growth". Changes in the repo rate affect bond yields and influence borrowing costs and loan rates.

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