Status quo maintained on key lending rates

The Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC), during its third bi-monthly monetary policy review, the sixth and the final one for the fiscal 2016-17, kept the repurchase rate, or the short-term lending rate it charges on borrowings by commercial banks, unchanged at 6.25 per cent.The reverse repurchase rate automatically remained unchanged at 5.75 per cent. 

According to RBI, all six members of the MPC panel, chaired by the RBI Governor Urjit Patel, voted in favour of the monetary policy decisions, the minutes of which will be released on February 22, 2017. 

“On the basis of an assessment of the current and evolving macroeconomic situation at its meeting on Wednesday, the MPC decided to keep the policy repo rate under the liquidity adjustment facility (LAF) unchanged at 6.25 per cent,” RBI said in its sixth bi-monthly monetary policy statement. 

“Consequently, the reverse repo rate under the LAF remains unchanged at 5.75 per cent, and the marginal standing facility (MSF) rate and the Bank Rate at 6.75 per cent. The decision of the MPC is consistent with a neutral stance of monetary policy in consonance with the objective of achieving consumer price index (CPI) inflation at 5 per cent by Q4 of 2016-17 and the medium-term target of 4 per cent within a band of +/- 2 per cent, while supporting growth.” 

However, the RBI projected a 7.4 per cent GVA (gross value added) growth for 2017-18 on the back of higher capital expenditure earmarked in the Union Budget for boosting the rural economy and affordable housing sectors. The central bank has estimated the GVA growth at 6.9 per cent for 2016-17. 

Nevertheless, investors showed their disappointment over the RBI decision to maintain status quo on its key lending rates. The Indian equities provisionally closed on a flat note with the wider 51-scrip Nifty of the National Stock Exchange inching up by 0.75 points or 0.01 per cent to 8,769.05 points.