RBI Keeps Key Lending Rate Unchanged, Meets Economists' Expectations: 10 Points

File Pic:PTI

The repo rate, or the key interest rate at which the central bank lends short-term funds to commercial banks, stood at 6.5 per cent, said the RBI's fifth bi-monthly policy statement for 2018-19.

"Based on an assessment of prevailing liquidity conditions and also of the durable liquidity needs going forward, the Reserve Bank has chose to conduct the purchase of ... government securities under open market operations for an aggregate amount of Rs 100 billion on December 6, 2018 (Thursday)", the central bank said.

The monetary policy committee maintained the policy stance to "calibrated tightening".

It has come to light that only one out of the six members voted in favour of easing the stance.

This is for the second time in a row that the central bank did not tinker with the interest rate. The reverse repo rate is used by the monetary policy committee as a tool to control the money supply in the country.

The SLR is being cut in order to align it with the Liquidity Coverage Ratio (LCR) requirement.

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SLR lowered to align with Liquidity Coverage Ratio: In order to align the SLR with the LCR requirement, the MPC made a decision to reduce the SLR by 25 basis points every calendar quarter until the SLR reaches 18 per cent of Net Demand and Time Liabilities (NDTL). RBI said inflation in the second half of the current fiscal is projected at 2.7-3.2 percent. Currently, SLR stands at 19.5 percent.

Will RBI lower the cash reserve ratio for banks? The RBI has also maintained the GDP for 2018-19 at 7.4 per cent.

RBI changed the policy stance to "calibrated tightening" from "neutral", while affirming its commitment to achieve the medium-term objectives to contain price rise.

The three-day meeting of the Monetary Policy Committee (MPC) meeting started on December 3.

The CPI inflation has been projected at 2.7-3.2 percent for the October-March period, the statement said.

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