It has, however, cut the growth projection for current fiscal to 7.3 per cent, from 7.4 per cent. After this announcement, there seems to be no change in the interest rates for home loans, auto loans and personal loans.
The central bank had last changed the policy rates on 4 October 2016, when the policy rate was cut by 25 bp.
SLR is the percentage of deposits banks must park in government securities. “MPC members declined the request of finance ministry for that meeting”.
Bank of America Merill Lynch said the Monetary Policy Committee’s (MPC) concerns on inflation are dissolving given the cut in its outlook to 3.5-4.5 per cent band in H2FY17 as against 5 per cent earlier, and expected a rate cut at the next review on August 2 if the rains are good. “Seldom have economic conditions warranted a substantial monetary easing as they are now”. “Headline inflation has been running well below the target so far”, he said, according to PTI.
RBI Governor usually meets Finance Minister before the monetary policy review.
According to data furnished by the Ministry of Statistics and Programme Implementation under a new series April retail inflation rate based on the Consumer Price Index (CPI) was lower than 5.47 per cent recorded during April previous year.
However, for the first time since the committee was set up in September, one of the six-member panel dissented on the decision. Although banks continue to lose higher-rated clients to the debt capital markets, cuts in bank lending rates will pressurise their profitability levels in the absence of credit growth, if not supported by sharp fall in cost of funds.
The six-member Monetary Policy Committee (MPC) headed by RBI Governor Urjit Patel will meet on June 6-7 to decide on the key interest rates. “Accordingly, the MPC made a decision to keep the policy rate unchanged with a neutral stance and remain watchful of incoming data”.
The resolution of the MPC will be placed on the website in the afternoon of June 7, the central bank said in a statement.
The Reserve Bank today marginally lowered the economic growth forecast for the current fiscal to 7.3 per cent even as it hoped that remonetisation would enable pick-up in consumer spending, especially in the cash-intensive segments.
What analysts and investors are looking for this time is a less hawkish policy statement to reflect reduced fears of inflationary pressures. There is also greater clarity on the rainfall, with the IMD predicting for normal monsoons this season which can help the food inflation situation.
“We respect the decision taken by the RBI, which is in the broader good of the country”, Subramanian told reporters after the central bank’s announcement adding, however, that “I wanted to give you my own technical assessment of the inflation and growth outlook”. Government intends to roll out GST from July 1.
Months after former RBI Governor Raghuram Rajan hung up his boots, Chief Economic Adviser Arvind Subramanian on Thursday said he always had differences with Rajan who advocated framing policies by keeping in mind other global factors. In its first bi-monthly monetary policy statement, released in April, it had projected an average rate of inflation of 4.5 per cent and 5 per cent for the first and the second half, respectively.
While suggesting that it remained fully flexible, it hinted that targeted growth enabling interventions were likely to be much better to address growth challenges in absence of efficient transmission of cuts due to overhang of bad loans on the books of banks.