Policy rate kept unchanged in line with
expectations: The Reserve Bank of India (RBI) in its
mid-quarter review of monetary policy today kept the
repo rate and reverse repo unchanged at 8.5% and
7.5% respectively. Consequently the marginal standing
facility (MSF) rate stands unchanged at 9.5%. Further it
also kept the cash reserve ratio (CRR) unchanged at 6%.
This was in line with consensus expectations. However,
while we were not expecting repo or reverse repo rate to
be changed, we were expecting a 60% chance of a CRR
cut in today’s meeting given the continued stress in
inter-bank liquidity condition. The repo rate is the rate at
which the RBI provides liquidity to the commercial banks
and the reverse repo is the rate earned by banks on the
excess liquidity parked with the RBI. MSF is the
additional borrowing window for banks that will provide
liquidity at 100 bps above the repo rate in times of
extreme shortfall in interbank liquidity. Cash reserve
ratio (CRR) is the percentage of net demand and time
liabilities (NDTL) that commercial banks need to keep
with the RBI as cash.
Policy Statement Comments on Key Issues..............


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