No Change in Interest Rate Regime by RBI for the Time Being

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  • The Reserve Bank of India has not changed Repo Rate & Reverse Repo Rate due to expected rise in inflationary trends.
  • The Reserve Bank of India has kept the interest Rate unchanged in review of its monetary Policy of 2017-18 in a meeting held on 6th December, 2017.
  • It has also kept intact the interest rate and key lending rate during the Review of Monetary Policy Meeting.
  • The RBI kept the Repo rate at 6 % and Reverse Repo Rate at 5.75%.
  • The reason behind not changing in policy rate is to put control on expected rise in inflation.
  • The Repo Rate is the Rate at which RBI lends money and Reverse Repo Rate is the Rate at which RBI borrows money from Bank.
  • The increase in Repo Rate will increase the cost of borrowing hence it will discourage lenders to borrow money and demand for loans become low.
  • The RBI Governor expressed hope that holding of Repo Rate will lead to increase in economic growth.
  • RBI had cut repo rate 0.25% last time in August 2017. Presently, there are not chances of cut off in repo rate as the RBI is expecting 0.1% increase in inflationary trends.
  • Hence, the Central Bank is maintaining “status Quo” or a neutral stance in monetary policy but it might be increased in future if required.
  • The RBI pointed out certain factors that could raise inflation i.e. high increase in price of crude oil in global market and increase in payment of Arears/DA/HRA to Government employees after compliance of terms of Seventh pay commission.
  • The RBI has kept it growth forecast unchanged at 6.7% for the current fiscal year 2017-18.

The next meeting to review RBI’s Monetary Policy will be held in 6-7th February, 2018.

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