No change in repo rates by RBI still at 8%

By Accommodation Times News Services

raghuram rajan rbi governerReserve Bank of India Governor Raghuram Rajan, announced RBI’s monetary policy on 1st Apiril, 2014, Tuesday keeping the repo rates unchanged at 8%. While repo rate was kept unchanged at 8%, Cash Reserve Ratio (CRR) and reverse repo rate were maintained at status quo of 4% and 7% respectively. On its part, the RBI cautioned against the persistent inflationary pressures to the economy, and highlighted that its main objective was to curb inflation.

Mr. Rajan claimed that, on the basis of an assessment of the current and evolving macroeconomic situation, we have decided today to keep the policy repo rate under the liquidity adjustment facility (LAF) unchanged at 8.0 per cent.

He said, they have also decided to increase the liquidity provided under 7-day and 14-day term repos from 0.5 per cent of net demand and time liabilities (NDTL) of the banking system to 0.75 per cent, and decrease the liquidity provided under overnight repos under the LAF from 0.5 per cent of bank-wise NDTL to 0.25 per cent with immediate effect.

“Domestically, real GDP growth continued to be modest in Q3 of 2013-14, with some strengthening of activity in services such as trade, hotels, transport and communication, and financing, real estate and business services. Despite some positive movement in more recent data, industrial activity continues to be a drag on the economy, with retrenchment in both consumption and investment demand reflected in the contraction of output of consumer durables as well as capital goods. In the quarters ahead, the boost provided by robust agricultural production in 2013 may wane”, the RBI said.

Anuj Puri – Chairman & Country Head, JLL India reacting on RBI’s unchanged rep rates said that, “the RBI is clearly without choices in the matter as, even a marginal increase would have added further pressure on already struggling rate-sensitive sectors such as real estate, automobiles and banking, and negatively impacted borrowing sentiments of consumers. As things stand now, consumption is already very low in these sectors. Instead of looking for rate cuts in the RBI policy, the real estate sector will keep a hawk eye on decreased inflation. When this happens, it is certain that the RBI will announce rate cuts which will benefit the real estate sector as well as other industries.”

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