Millennium Post

RBI maintains short-term lending rate, cuts SLR

Belying hopes of both the government and India Inc., the Reserve Bank of India (RBI) - in its second bi-monthly monetary policy review of 2017-18 - on Wednesday kept its key lending rate unchanged at 6.25 per cent.

However, to induce liquidity into the system, the RBI reduced by 50 basis points to 20 per cent the Statutory Liquidity Ratio (SLR), which is a reserve requirement that commercial banks have to maintain.

The apex bank maintained at 4 per cent the cash reserve ratio (CRR), or the quantum of liquid funds which commercial banks have to keep.

This is the fourth consecutive policy review in which the apex bank has maintained status quo on its repo, or short-term lending rate, since it reduced it by 25 basis points to 6.25 per cent in October 2016.

Consequently, the reverse repo rate, under the liquidity adjustment facility (LAF), remains at 6 per cent, and the marginal standing facility (MSF) rate and the bank rate at 6.50 per cent.

The decision to maintain the repo rate was taken by the six-member monetary policy committee (MPC) headed by RBI Governor Urjit Patel. In Wednesday's decision, the MPC voted five-to-one in favour of holding the rate.

At its last policy review in April, the RBI had kept the key lending rate unchanged but narrowed its policy corridor and hiked the reverse repo rate to six per cent.

The equity markets remained unmoved by the RBI decision. The Nifty of the National Stock Exchange (NSE) traded flat at 9,640.10 points -- up a mere 2.95 points or 0.03 per cent (at 2.30 p.m).

The 30-scrip Sensitive Index (Sensex) of the BSE, which opened at 31,252.71 points, traded at 31,197.46 points -- up 6.90 points or 0.02 per cent from its previous close at 31,190.56 points.

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