RBI keeps interest rate unchanged at 6.25pc

7th Dec 2016
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Taking markets by surprise, RBI Governor Urjit Patel today kept short-term lending rate unchanged even as the central bank lowered GDP growth rate to 7.1 percent and short-term disruption in economic activities due to demonetisation.

Image : Bloomberg
Image: Bloomberg

Patel-led 6-member Monetary Policy Committee, which had in its first policy review cut interest rate by 0.25 percent in October, belied expectations to keep benchmark repo rate unchanged at 6.25 percent unanimously.


Also readSensex up 77 pts ahead of RBI policy meet


In view of disruption in economic activities due to demonetisation, RBI lowered growth forecast from 7.6 percent to 7.1 percent for the current fiscal. Following are the highlights of RBI's fifth bi-monthly monetary policy statement, 2016-17:

  • Repo rate unchanged at 6.25 percent, Reverse Repo at 5.75 percent
  •  Cash reserve ratio or CRR unchanged at 4 percent
  •  Cuts growth forecast to 7.1 percent, from 7.6 percent for this fiscal
  • Inflation target remains 5 percent for March 2017, upside risk
  •  Demonetisation to lower prices of perishables, could reduce inflation by 10-15 basis points by December
  •  All MPC members voted in favour of status quo in policy
  • Demonetisation to result in short-run disruptions in cash-intensive sectors
  • Crude price volatility, surge in financial market turbulence could put March end inflation target at risk
  • Foreign exchange reserve rose to all-time high of $364 billion on December 2
  •  RBI injected Rs 1.1 lakh crore liquidity through OMO purchases this fiscal
  • Next monetary policy on February 8.

Ahead of this annoncement, the Sensex has moved up another 77 points with interest-sensitive stocks gaining the most as investors raised bets on RBI’s policy decision amid firm global cues. The rupee’s good run against the dollar too lifted the overall mood. The 30-share index rose 77.17 points, or 0.29 percent, to 26,469.935, with sectoral indices – auto, realty, banking, oil & gas and power — trading in the positive zone with a gain of up to 0.72 percent. The gauge had rallied 162.10 points in the previous two sessions. The NSE Nifty too added 27.55 points, or 0.33 percent, at 8,170.70.

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