The Reserve Bank of India on Wednesday announced that the repo rate would remain unchanged at 6.25 per cent. Consequently, the reverse repo rate under the LAF remains unchanged at 5.75 per cent, and the marginal standing facility (MSF) rate and the Bank Rate at 6.75 per cent. Governor Urjit Patel announced that the central bank has decided to withdraw the incremental Cash Reserve Ratio (CRR) from December 10.
In its policy review, the RBI also lowered GDP growth estimate to 7.1 per cent in 2016-17 from an earlier projection of 7.6 per cent.
WATCH VIDEO | Reserve Bank Of India Keeps Repo Rate Unchanged Post Demonetisation
“In October 2016, GVA growth in H2 was projected at 7.7 per cent and for the full year at 7.6 per cent. 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 7th CPC award, GVA growth for 2016-17 is revised down from 7.6 per cent to 7.1 per cent, with evenly balanced risks,” the monetary policy committee said in its statement.
In the announcement, RBI Governor Urjit Patel said it was decided to keep retail inflation at five per cent in the fourth quarter of current fiscal. “Retail inflation measured by the headline consumer price index (CPI) eased more than expected for the third consecutive month in October, driven down by a sharper than anticipated deflation in the prices of vegetables. Underlying this softer reading, however, was an upturn in momentum as prices rose month-on-month across the board,” the statement read.
First official numbers. 19.1 billion pieces of notes supplied, says RBI @IndianExpress
— P Vaidyanathan Iyer (@iyervaidy) December 7, 2016
RBI Governor says Rs11.55 lakh crore in old currency of Rs500 and Rs1000 has come back to the banks @IndianExpress
— Khushboo Narayan (@khushboo_n) December 7, 2016
The RBI also said that there was adequate supply of notes, asking people not to hoard new currency. The central bank claimed it supplied Rs 4 lakh crore in new notes. “Demonetisation decision was not taken in haste but after detailed deliberation as high level secrecy had to be maintained,” deputy RBI Governor R Gandhi said.
This is the first policy review of the Reserve Bank of India since November 8, 2016 when Prime Minister Narendra Modi announced the demonetisation or scrapping of Rs 500 and Rs 1000 currency notes.
All six members voted in favour of the monetary policy decision. This is the fifth bi-monthly monetary policy statement for the fiscal 2016-17.