RBI rates unchanged as rains hit food prices

No relief yet for retail consumers while banks are facing fall in credit growth

GN Bureau | April 7, 2015


#RBI   #reserve bank of india   #repo rate   #CRR   #cash reserve ratio   #lending   #credit   #rains  

The Reserve Bank of India in its first monetary policy statement for the new financial year 2015-16 has not changed both the repo rate and the cash reserve ratio (CRR) due to increased food prices after unseasonable rains in the country.

The repo rate, at which the RBI lends to banks, has been retained at 7.50 percent. The CRR for banks has also been kept unchanged at 4 percent. The CRR is the percentage of total funds that the banks have to keep with the RBI. The RBI uses the CRR to drain out excessive liquidity out of the banking system.

Unseasonal rainfall in parts of the country has pushed up prices of winter crops with the damage to wheat and pulse in the range of 25-30 percent of the crop yields.

The policy is geared more towards systemic changes, RBI Governor Raghuram Rajan said at a press conference on Tuesday.

Rajan has cut the repo rate twice this calendar year, once in January and again in March, both outside of the policy review cycle. RBI had lowered its policy rate by 25 basis points to 7.50 percent on March 4, after a similar cut on January 15, on the back of softening inflation and the government's commitment to continue with the fiscal consolidation programme.

However, most banks have been loath to pass on the cuts to borrowers, largely because of the pressure it would put on already-stressed margins, as well as a rising non-performing assets.

This has led to a fall in credit growth The lack of credit growth has also been pointed to as a key reason why industry has been unwilling to borrow funds domestically, and has instead turned to cheaper overseas funds.

Meanwhile, the consumer price index rose 5.37 percent in February, marking a fifth consecutive month of staying within the RBI's target of 2 to 6 percent.

First Bi-monthly Monetary Policy Statement, 2015-16

The Monetary Policy Report – April 2015: Click here

Comments

 

Other News

Listening to tomorrow: The imperative for youth-driven data in India

Over a decade and a half ago when I was still a student, millennials felt the burning need to break down the barriers of gatekeeping in traditional media. Young voices, brimming with ideas and opinions, were often sidelined, their perspectives deemed too marginal or unrefined for mainstream discourse. This

Israel-Palestine War: Lessons from Past Peace Efforts

Israel-Palestine War: Give Peace a Chance By Dr. Joseph K. Thomas IndiePress, 243 pages, Rs 399 T

How inner work helps subvert painful narratives

Unashamed By Neha Bhat HarperCollins, 240 pages, Rs 499   * How do I connect better with my partner? *&nbs

Heatwave spikes power demand: measures taken to ensure supply

The Northern Region has been experiencing high power demand conditions due to a prevailing heat wave since May 17. Despite these challenging conditions, the highest ever peak demand of 89 GW in the Northern Region was successfully met on June 17. This achievement was made possible by import

PM to release 17th installment of PM-KISAN at Varanasi on Tuesday

Prime minister Narendra Modi will release the 17th instalment of the PM-KISAN scheme on Tuesday at Varanasi and more than 9.26 crore farmers will receive the benefits amounting to over Rs.20,000 crore. The PM will also distribute the certificates to more than 30,000 SHGs trained as Krishi Sakhis to work as

Taming turbulence in Indian aviation

The booming Indian aviation industry, among the fastest growing sectors in the world, is projected to be valued at $40 billion by 2027. But, despite robust demand for air travel across the country, more than 50 airlines have closed down in the last decade in India and most private airlines have closed with

Visionary Talk: Amitabh Gupta, Pune Police Commissioner with Kailashnath Adhikari, MD, Governance Now


Archives

Current Issue

Opinion

Facebook Twitter Google Plus Linkedin Subscribe Newsletter

Twitter