RBI surprises with reverse Reop hike ; Few significant points

The apex bank today kept the repo rate unchanged at 6.25% and the apex bank also decided to hike the reverse repo rate by 0.25% to 6% from 5.75%.

Below few pointers from the RBI meet:

1.   The inflation is expected to be close to 4.5% in H1 and closer to 5% in the send half of FY18. Inflation to rise to 4.2% in Q1FY18 from 3.7% currently.Inflation to surpass 5% in Q3FY18 before falling to 4.9% by March.

2.   The liquidity surplus exists in the system. Demonetisation led to plenty of people depositing their cash in bank and then the flow of dollars in Indian markets has led to a situation in India where the liquidity is surplus and threatens to push inflation higher.

3.   The global economy is expected to grow steadily in FY18.

4.    Standing deposit Facility (SDF) :- 
a.    Will continue to pursue standing deposit facility (SDF) with the government.
b.    Government examining introduction of SDF to manage liquidity.
c.    SDF to provide greater flexibility in managing liquidity.
d.    RBI working towards SDF facility.
 
5.     The pace of deceleration of NPAs and the formation of new NPAs have come down.

6.     Banks will now be allowed to invest in Real Estate Investment Trusts (REITs). Detailed guidelines will be release before May.

7.     RBI will be issuing corrective action framework for banks mid-april.

8.     RBI examines feedback on merchant discounts on debit cards.

9.     RBI committed to reversing system liquidity to near neutrality.

10.   The FY18 GDP growth seen at 7.4%