Patel on wait-and-watch mode

The RBI has kept key policy rate — Repo rate — unchanged at 6.25%, stating that the growth for 2016-17 has turned uncertain after the unexpected loss of momentum by 50 bps in Q2 and the effects of the withdrawal of notes which are still playing out

INTEREST RATES:

The decision (to retain Repo rate) is “consistent with an accommodative stance of monetary policy in consonance with the objective of achieving consumer price (CPI) inflation at 5 per cent by Q4 of 2016-17 and the medium-term target of 4 per cent within a band of +/- 2 per cent, while supporting growth”

GROWTH RATE CUT:

Incorporating the expected loss of growth momentum in Q3 and waning effects in Q4 alongside the boost to consumption demand from higher agricultural output and the implementation of the Central Pay Commission’s (7th CPC) award, gross value added (GVA) growth for 2016-17 has been revised down from 7.6 per cent to 7.1 per cent

INFLATION BENIGN:

The withdrawal of notes could result in a possible temporary reduction in inflation of the order of 10-15 bps in Q3. Taking these factors into account, headline inflation is projected at 5 per cent in Q4 with risks tilted to the upside

INCREMENTAL CRR GOES:

100 per cent incremental CRR on deposits raised between September 16 and November 11 has been removed. The liquidity released by the discontinuation of the incremental CRR would be absorbed by a mix of MSS issuances and LAF operations

MPC UNANIMOUS:

All the six members of the Monetary Policy Committee, including three members of the RBI and the government, voted in favour of the monetary policy decision