RBI cuts SLR, keeps Repo, CRR unchanged

Cites lack of substantial development on disinflationary process or on fiscal outlook since Jan 15 to keep rates unchanged

GN Bureau | February 3, 2015



In its sixth bi-monthly monetary policy review RBI on February 3 reduced the statutory liquidity ratio (SLR) of scheduled commercial banks by 50 basis points from 22 per cent to 21.5 per cent with effect from the fortnight beginning February 7.

While reducing the SLR requirement, RBI said, “In order to create space for banks to expand credit, the SLR is being reduced from 22.0 per cent of NDTL (net demand and time liabilities) to 21.5 per cent. Banks should use this headroom to increase their lending to productive sectors on competitive terms so as to support investment and growth.”

However, the apex bank kept the repo rate unchanged at 7.75 percent. In an unscheduled announcement on January 15, RBI had cut the repo rate by 25 basis point from 8 percent to 7.75 per cent.

The next change is now expected after the government presents its annual budget at the end of this month.

Reasoning for keeping interest rates unchanged, RBI, in its policy statement, said, “Given that there have been no substantial new developments on the disinflationary process or on the fiscal outlook since January 15, it is appropriate for the Reserve Bank to await them and maintain the current interest rate stance.”

Reduction in the statutory liquidity ratio (SLR) would mean more funds for banks to lend to its customers.

Speaking on the growth prospects, RBI added, "The outlook for growth has improved modestly on the back of disinflation, real income gains from decline in oil prices, easier financing conditions and some progress on stalled projects. These conditions should augur well for reinvigoration of private consumption demand, but the overall impact on growth could be partly offset by the weaker global growth outlook and short-run fiscal drag due to likely compression in plan expenditure in order to meet consolidation targets set for the year.”

What is the statutory liquidity ratio (SLR)

As mandated by the RBI every bank is required to maintain at the close of business every day, a minimum proportion of their Net Demand and Time Liabilities as liquid assets in the form of cash, gold and un-encumbered approved securities. The ratio of liquid assets to demand and time liabilities is known as Statutory Liquidity Ratio (SLR). Decrease in the SLR allows the banks to pump more money into the economy.

Comments

 

Other News

Growing Up as a Multilinguist

Being and Becoming Multilingual: Some Narratives Edited by Rajesh Sachdeva and Rama Kant Agnihotri

Mumbai civil body refutes allegations of scam in tenement scheme

The BrihanMumbai municipal corporation (BMC) has rejected the Congress accusations of financial irregularities worth Rs 8,000 crore—9,000 croe in awarding contracts for getting project-affected people (PAP) tenements on private land.    BMC has said that it implements vital p

Sedition law: Can it have a place in democracy?

Does the concept of sedition have a place in modern democracies? This question became more relevant when the apex court recently put the country`s colonial-era sedition law on abeyance stating that there is a “requirement to balance… security interests and integrity of the State… and th

Not just another Manto anthology

The Collected Stories of Saadat Hasan Manto: Volume 1: Bombay and Poona Translated by Nasreen Rehman Aleph Book Company, 548 pages, Rs 999 There are writers, there are writers’ writers, and then there are readers’ writers. Saadat Hasan Mant

These tribal women may be illiterate but are successful entrepreneurs

Meet Promila Krishna, 39, Lalita Nayak, 40, Parbati Gadba, 42, Sanadei Dhuruwa, 39, and Nabita Barika, 41, of Kundra block in Odisha’s Koraput district. Except for Promila who is a matriculate, others haven’t attended school beyond the elementary level. However, while introducing themselves to

Women in workforce: Despite policy support, why it is declining

Michelle Obama once said, “No country can ever truly flourish if it stifles the potential of its women and deprives itself of the contributions of half of its citizens.” That should be so obvious, but it is not, and countries keep depriving themselves of the contributions of half of their popul

Visionary Talk: Arvind Sawant, Member of Parliament with Kailashnath Adhikari, MD, Governance Now


Archives

Current Issue

Opinion

Facebook    Twitter    Google Plus    Linkedin    Subscribe Newsletter

Twitter