RBI’s Second Quarter Monetary Policy Review 2013-14
DSIJ Intelligence / 29 Oct 2013
The apex bank has hiked the repo rate by 25 basis points and reduced the MSF rate by an equal margin. The CRR has been left unchanged, and liquidity provided through term repos has been increased. The markets have reacted positively to the announcement.
The highlights of the monetary policy are:
1) The apex bank has reduced the marginal standing facility (MSF) rate by 25 basis points from 9.0% to 8.75% with immediate effect.
2) The policy repo rate under the liquidity adjustment facility (LAF) has been increased by 25 basis points from 7.5% to 7.75% with immediate effect.
3) The bank has kept the cash reserve ratio (CRR) unchanged at 4.0% of the net demand and time liability (NDTL)
4) It has increased the liquidity provided through term repos of 7-day and 14-day tenure from 0.25% of NDTL of the banking system to 0.5% with immediate effect.
The reverse repo rate under the LAF stands adjusted to 6.75% and the bank rate stands reduced to 8.75% with immediate effect.
With these changes, the MSF rate and the Bank Rate are recalibrated to 100 basis points above the repo rate.
While the markets have moved higher immediately, what would the longer-term implications of the latest announcement be?What does this mean for loan and deposit rates? Watch this space to read more.
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