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Business News/ Industry / RBI’s monetary policy statement: Key highlights
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RBI’s monetary policy statement: Key highlights

Following are the highlights of RBI's fifth bi-monthly monetary policy statement, 2016-17

RBI’s next monetary policy statement is on 8 February. Photo: BloombergPremium
RBI’s next monetary policy statement is on 8 February. Photo: Bloomberg

Taking markets by surprise, RBI governor Urjit Patel on Wednesday kept short-term lending rate unchanged. The central bank lowered its forecast for India’s gross domestic product (GDP) growth to 7.1% for this fiscal and said demonetisation would lead to a short term disruption in economic activity. The benefits are in the medium and long term, it said.

The Patel-led six-member Monetary Policy Committee (MPC), which had in its first policy review in October cut interest rate by 0.25%, belied expectations and unanimously decided to keep the benchmark repo rate unchanged at 6.25%.

Following are the highlights of RBI’s fifth bi-monthly monetary policy statement, 2016-17:

1. The RBI keeps repo rate unchanged at 6.25%, reverse repo at 5.75%.

2. The RBI leaves cash reserve ratio (CRR) unchanged at 4% but said it will withdraw the temporary 100% hike in the CRR announced late last month in the fortnight beginning 10 December.

3. The RBI cuts growth forecast to 7.1%, from 7.6% for this fiscal.

4. The RBI keeps the inflation target at 5% for March 2017, with upside risk.

5. The RBI said demonetisation will lower the prices of perishables, could reduce inflation by 10-15 basis points by December.

6. All the six members of the RBI panel voted to hold rates. Inflation could slow by 10-15 basis points in October-December due to the cash clampdown.

7. The RBI’s monetary policy statement said demonetisation will result in short-run disruptions in cash-intensive sectors.

8. RBI says crude price volatility, surge in financial market turbulence could put March-end inflation target at risk.

9. Foreign exchange reserve rose to all-time high of $364 billion on 2 December.

10.The RBI’s next monetary policy statement is on 8 February.

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Published: 07 Dec 2016, 04:58 PM IST
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