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RBI Sticks To Price Stability, Leaves Growth To Fiscal Policy

31-Aug-2018Charan Singh

The second bi-monthly Monetary Policy of the Reserve Bank of India was announced on June 7, 2017, holding the repo rate unchanged at 6.25 percent. Consequently, the reverse repo rate under the Liquidity Adjustment Facility remains at 6 percent and the Marginal Standing Facility rate and bank rate at 6.5 percent. The Statutory Liquidity Ratio has been lowered by 50 basis points to 20 percent with effect from June 24, 2017. To encourage economic growth, given the importance of housing sector, the RBI has reduced risk-weights of select categories of housing loans and reduced standard asset provisioning rates. This would imply a reduction in the interest rates on housing. The decision to hold the interest rates needs analysis.

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