New Framework
The appointment of former Reserve Bank of India Governor Shaktikanta Das as “Principal Secretary-2” to Prime Minister Narendra Modi marks a significant shift in governance strategy.
In its bi-monthly monetary policy review, the Reserve Bank of India (RBI) on Thursday kept key repo rate or lending rate unchanged at 6.25 per cent but hiked reverse repo rate by 25 basis points (bps) to 6 per cent.
The Reserve Bank also narrowed policy rate corridor, due to liquidity flush, by increasing marginal standing facility rate and bank rate to 6.50 per cent.
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“After demonetisation, large liquidity surplus impacted banking system,” RBI said, adding, “The future course of rates will depend on macro economic conditions”.
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In February, the wholesale inflation soared to a 39-month high of 6.55 per cent while retail inflation inched up to 3.65 per cent due to rise in food and fuel prices.
For financial year 2017-18, the RBI projects inflation at 4.5 per cent in first half and 5 per cent in the second half.
“Upside risk to inflation arises from one-off effect of Goods and Services Tax,” the RBI said.
It was expected that the Reserve Bank would keep the key rates unchanged amid hardening inflation.
Today's policy was the fourth bi-monthly policy based on the recommendations of the six-member Monetary Policy Committee (MPC).
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