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

Nitish Kumar quits as Bihar CM

Nitish Kumar resigned as chief minister of Bihar on Wednesday, just hours after RJD chief Lalu Prasad ruled out his son and deputy chief minister Tejashwi Yadav putting in his papers following a case being registered by the CBI. The JD(U) and RJD alliance had been under considerable strain o

Will the needy get homes under PMAY?

 The Pradhan Mantri Awas Yojana (PMAY), introduced in June 2015, aims at providing every family with “a pucca house with water connection, toilet facilities, 24x7 electricity supply” by the time the nation completes 75 years of its Independence in 2022.   The Yoj

No longer a walk in the park for bureaucrats

Continuing as a bureaucrat just got a lot tougher with the government weeding out the incompetent and taking action against 381 civil services officers, including 24 who were from the Indian Administrative Service.   The Narendra Modi government’s action against civil s

Kashmir’s ‘Nelson Mandela’ arrested for terror funding

 The National Investigating Agency (NIA) has arrested Shabbir Shah, who was once called the Nelson Mandela of Kashmir for his advocacy of peace, for his alleged involvement in money laundering to support terrorism in Kashmir. Shah, whose J&K democratic freedom party is a part of the pro-

Quantum urbanism: Step one, dismantle systems thinking once and for all

Feel your favourite city. The words that typically come to your mind are liberally fused with adjectives in a valiant effort to give shape to our deeply felt emotions. It is quite common to find descriptions that are a chaotic and joyful mix of traits and idiosyncrasies that one can mistake for a good frie

Should employment exchanges be scrapped?

Should employment exchanges be scrapped?





Video

Death toll rises to 17 in Mumbai building collapse

Current Issue

Opinion

Facebook    Twitter    Google Plus    Linkedin    Subscribe Newsletter

Twitter