RBI holds policy rate steady at 6.00%, forecasted lower growth in FY18

Mumbai, October 4: Eyeing rising retail inflation, the Reserve Bank of India (RBI) kept its key policy rate unchanged at 6.00% in its fourth bi-monthly monetary policy review on Wednesday. The apex bank decides to keep reverse repo rate remains at 5.75% and bank rate at 6.25%.

The central bank has said that CPI (consumer price index) for the January-March and April-June quarters of 2018 is seen at 4.6 percent. CPI for October-December 2018 is seen at 4.9 percent, RBI said. Meanwhile, statutory liquidity ratio (SLR) has been cut by 50 basis points to 19.5 percent, effective fortnight starting October 14.

RBI’s Governor Urjit Patel says that implementation of GST has rendered short-term prospects uncertain. Patel says teething problems with GST might get resolved soon.

He further said that recapitalising PSU banks is necessary to ensure that growth impulse is not restrained. Also he noted that the core industries performed well in August.

The six member monetary policy committee (MPC), headed by new RBI governor Urjit Patel, was of the view that the moderation in price trends have persisted long enough to warrant lower loan costs, necessary to engineer a quick industrial turnaround and goad people to spend more.

The decision of the MPC is consistent with a neutral stance of monetary policy in consonance with the objective of achieving the medium-term target for consumer price index (CPI) inflation of 4% within a band of +/- 2% while supporting growth.

Notably, Benchmark indices are trading higher ahead of outcome from Reserve Bank of India's policy meet. The Sensex was up 139.33 points at 31636.71, and the Nifty was up 46.05 points at 9905.55.

In its last policy review in August, the RBI reduced the repo rate by 0.25 per cent to 6 per cent, citing reduction in inflation risks.