RBI retains repo rate at 6 per cent, lowers growth projection to 6.7 per cent

The Reserve Bank of India announced its bi-monthly monetary policy review on Wednesday. The apex bank failed all the speculations regarding a rate change, maintaining the same rates for key factors. RBI announced that the repo rate at 5.75 per cent will remain unaltered. RBI revised its growth projection lower from the erstwhile 7.3 per cent to 6.7 per cent.

Slumping through the last five quarters, the GDP growth rate hit its 3-year low of 5.7 per cent during the June quarter. Thus, several analysts expected the RBI to slash the rates in order to boost the economic growth. However, the inflation rate has constantly been on a moderate high.       

The RBI altered standard liquidity ratio (SLR) by 50 basis points from 20 per cent to 19.5 per cent. SLR is the ratio of reserve required by a commercial bank ahead of providing credit to creditors. The reserve is maintained in the form of gold and government approved securities, among others. The marginal standing facility (MSF) rate and bank rate has also been kept the same at 6.25 per cent.

Further, RBI said that the inflation is expected to increase from its present level to a range between 4.2-4.6 per cent in the second half of 2017, including house rent allowance by the Centre.