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October 04, 2017

RBI's 4th bi-monthly monetary policy review highlights


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In it's fourth bi-monthly monetary policy review, the Reserve Bank of India (RBI) has kept the key interest rates unchanged. It had last cut rates by 25 bps two months earlier in its August review. The pause was on expected lines as market consensus had predicted a pause in its cutting cycle.

The six member monetary policy committee voted on the basis of a majority for a pause. Dr. Chetan Ghate, Dr. Pami Dua, Dr. Viral V. Acharya, Dir Michael Patra and Dr. Urjit R. Patel were in favour of status quo while Dr. Ravindra H. Dholakia voted for a policy rate reduction of 25 basis points.

Here are the major highlights of RBI's 4th bi-monthly Monetary Policy Statement 2017-18

  • Key policy rate kept unchanged at 6 percent.
  • Reverse repo rate unchanged at 5.75 percent.
  • Cuts economic growth forecast to 6.7 percent from 7.3 percent for FY'18
  • Projects inflation at 4.2-4.6 percent in the second half.
  • GST implementation rendered prospects for the manufacturing sector uncertain in the short term.
  • Focus on keeping headline inflation close to 4 percent on a durable basis
  • RBI continues to work towards the resolution of stressed corporate exposures in bank balance sheets.
  • Recent structural reforms improving business environment, transparency and increasing formalisation of the economy.
  • Suggests concerted drive to restart stalled investment projects, enhance ease of doing business, including implification of the GST to boost growth.
  • Suggests rationalisation of "excessively high" stamp duties charged by states, faster rollout of affordable housing programme.
  • Next Monetary Policy Committee meeting on 5-6 December.

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