RBI keeps repo rate unchanged at 6.25 %

The Reserve Bank of India today maintained status quo on its key rates in its monetary policy review, and the repo rate, or the rate at which the RBI lends to banks, stands unchanged at 6(point)25 per cent, and the reverse repo rate, or the rate at which the RBI absorbs excess liquidity, also remains steady at 5(point)75 per cent.

But the Reserve Bank shifted its monetary policy stance from ‘accommodative’ to ‘neutral.’  Reserve Bank Governor Urjit Patel said the Monetary Policy Committee decided to change its policy stance while keeping the policy rate on hold to assess how the transitory effects of demonetisation on inflation and the output gap play out.

The RBI said it is committed to bringing headline inflation closer to 4 per cent on a durable basis, and this requires further significant decline in inflation expectations, especially since the services component of inflation that is sensitive to wage movements has been sticky.  The RBI also revised down its GDP growth forecast to 6.9 per cent for the current fiscal, from 7.4 per cent earlier. But it added that growth will pick up sharply to 7.4 per cent in the next fiscal.

The central bank also decided to form a separate enforcement department for stricter enforcement of its regulatory and supervisory actions.