RBI First Bi-monthly Policy Of FY17 Updates - Repo Rate Reduced By 25 Bps - SBI Clerks , SBI PO General Awareness

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The Reserve Bank of India has cut key policy rates by 25bps on Tuesday to 6.50%, in its first bi-monthly monetary policy of the new fiscal.


Review Of RBI First Bi-monthly Policy Of FY17 CRR SLR Repo Rate


The RBI has reduced the minimum daily maintenance of the cash reserve ratio (CRR) from 95% of the requirement to 90% with effect from the fortnight beginning April 16, 2016, while keeping the CRR unchanged at 4.0% of net demand and time liabilities (NDTL).

The RBI will continue to provide liquidity as required but progressively lower the average ex-ante liquidity deficit in the system from 1% of NDTL to a position closer to neutrality, it said in a release.

Most experts expected the RBI to cut rates by 0.25% to 0.50%. They expect the RBI to remain accommodative going ahead, in the fiscal.

The RBI had left its key policy rates unchanged -- with the repo rate at 6.75% and the reverse repo rate at 5.75%; CRR was left unchanged at 4% and SLR at 21.25% -- in the last two bi-monthly monetary policy review.

Name Rate
Repo Rate 6.75% (reduced by 25 basis point)
Reverse Repo Rate 5.75% (increased by 25 basis point)
CRR [Cash Reserve Ratio] 4% (Unchanged)
SLR [Statutory liquidity ratio] 21.25% (Reduced by 25 basis point)
MSF [Marginal Standing Facility] 7.00% (Reduced by 75 basis point)
Bank Rate 7.00% (Reduced by 75 basis point)



However, this time, the case for a rate cut has also been made stronger by projections of lower inflationary rates in March. The Bank of America Merill Lynch expects that inflation will ease to 5% in the month. Retail inflation eased to 5.18% in February while wholesale inflation continued in the negative zone for the 16th straight month.

Banks have also been keenly eyeing the outcome of the monetary policy before going ahead and cutting deposit and loan rates. This is despite a 1.3% cut in the small savings' scheme interest rates announced recently.


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