Banks Face Cash Crunch, Repo Rate Unchanged at 6.25%

December 07, 2016 16:00
Banks Face Cash Crunch, Repo Rate Unchanged at 6.25%

Against all the hopes, the Reserve Bank of India on Wednesday kept the key lending rate, repo rate, fixed at 6.25 per cent with all the six members of the Monetary Policy Committee voting in favour of a status-quo.

“Consequently, the reverse repo rate remains unchanged at 5.75 per cent,” RBI said in a press statement.

The central bank said, "the MPC decision was in line with the RBI's target of achieving an inflation target of 5 per cent by March 2017."

The central bank has also reduced GDP growth estimate to 7.1 per cent in 2016-17 from earlier projection of 7.6 per cent.

On demonetisation, RBI said, "withdrawal of old notes could result in temporary reduction in inflation by 10-15 basis points in third quarter."

"Demonetisation to result in short-run disruptions in cash-intensive sectors like retail, hotels, restaurants and transportation," RBI said in a statement.

RBI governor Urjit Patel said that "inflation numbers in September and October made room for a status-quo in the policy stance. From December 10, banks will not have to keep incremental CRR introduced by the central bank last month."

It was generally assumed that 25 basis points cut will be chosen by the central bank in repo rate, given the current uncertain fiscal environment in country and excess liquidity due to demonetization of Rs 500 and Rs 1,000 currency notes.

The RBI said on Wednesday that "banks received Rs 11.55 lakh crore in deposits since November 10 when the lenders started accepting discarded notes of Rs 500 and Rs 1,000 after demonetization on November 8."

Also Read: RBI Confirms Increased Withdrawal Limit For Overdraft Accounts To Rs. 50,000


If you enjoyed this Post, Sign up for Newsletter

(And get daily dose of political, entertainment news straight to your inbox)

Rate This Article
(0 votes)