RBI Fourth Bi-Monthly Policy: Lowest Repo After 4 years


Hello and welcome to ExamPundit. Here is the detailed update on Reserve Bank Of India's Fourth Bi-Monthly Policy. Thanks Dheeraj and FedEx for their inputs! :)


The Reserve Bank of India (RBI) lowered the benchmark repo rate by 50 basis points to 6.75 percent. It kept the CRR unchanged at 4 percent. This marks the fourth repo rate cut by the RBI since January 2015. However, it has lowered its FY16 GDP growth target to 7.4 percent from 7.6 percent. It also said the focus should now shift to bringing inflation down to 5 percent by FY17-end.

Types
Current Rate
Repo
 6.75% (Reduced by 50 bps)
Reverse Repo
 5.75 %
Bank rate
 7.75%
MSF
 7.75%
CRR
 4% (UNCHANGED)
SLR
 21.25%

The repo rate was last at 6.75 percent in March 2011.

However, the RBI cautioned that since the third bi-monthly statement of August 2015, global growth has moderated, especially in emerging market economies (EMEs), global trade has deteriorated further and downside risks to growth have increased.

However, as far as India is concerned, a tentative economic recovery is underway, but is still far from robust, the RBI statement states. 

The RBI has also said that foreign investment cap in government bonds will be relaxed in phases to 5 percent by March 2018. A hike in foreign investment limit in bonds will be announced every March, September.



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