Published: Wed, December 05, 2018
Economy | By

RBI maintains status quo: Key takeaways from fifth bi-monthly policy meet

RBI maintains status quo: Key takeaways from fifth bi-monthly policy meet

The Reserve Bank of India's monetary policy committee (MPC) will announce its repo rate decision at 2.30pm today.

"Based on an assessment of prevailing liquidity conditions and also of the durable liquidity needs going forward, the Reserve Bank has chose to conduct the purchase of ... government securities under open market operations for an aggregate amount of Rs 100 billion on December 6, 2018 (Thursday)", the central bank said. RBI said inflation in the second half of the current fiscal is projected at 2.7-3.2 percent.

The statutory liquidity ratio (SLR) will go down by 25 basis points every quarter from January-March, every calendar quarter, until the SLR reaches 18 percent of the Net Demand and Time Liabilities (NTDL), the policy statement said. Currently, SLR stands at 19.5 per cent. SLR refers to the share of bank's total deposit that it needs to maintain itself as liquid assets.

While many expected the RBI's MPC to change its stance due drop in global crude oil prices and appreciation of the rupee, the central bank is now expected to hold off the rates till the next bi-monthly meet. Barring large unexpected developments, we expect the RBI to remain in the pause mode for the reminder of FY19.


The monetary policy committee maintained the policy stance to "calibrated tightening". The RBI has also maintained the GDP for 2018-19 at 7.4 per cent. However, headline inflation, as measured by the consumer price index (CPI), for October came in below RBI estimates at 3.31%. RBI governor Urjit Patel had said calibrated tightening essentially meant that during this cycle, a rate cut would not be considered and that the central bank was not bound to increase rates at every policy meeting.

SLR is the reserve requirement that the commercial banks in India are required to maintain in the form of cash, gold reserves, government-approved securities before providing credit to the customers.

Expert committee for MSMEs: MSMEs play a key role in the economy but they remain vulnerable to structural and cyclical shocks, given their predominantly informal nature.

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