MANU/RPRL/0047/2016

Ministry : Reserve Bank of India

Department/Board : RBI

Press Release No. : 2015-2016/1807

Date : 02.02.2016

Sixth Bi-monthly Monetary Policy Statement, 2015-16 By Dr. Raghuram G. Rajan, Governor

Monetary and Liquidity Measures

On the basis of an assessment of the current and evolving macroeconomic situation, it has been decided to:

• keep the policy repo rate under the liquidity adjustment facility (LAF) unchanged at 6.75 per cent;

• keep the cash reserve ratio (CRR) of scheduled banks unchanged at 4.0 per cent of net demand and time liability (NDTL);

• continue to provide liquidity under overnight repos at 0.25 per cent of bank-wise NDTL at the LAF repo rate and liquidity under 14-day term repos as well as longer term repos of up to 0.75 per cent of NDTL of the banking system through auctions; and

• continue with daily variable rate repos and reverse repos to smooth liquidity.

Consequently, the reverse repo rate under the LAF will remain unchanged at 5.75 per cent, and the marginal standing facility (MSF) rate and the Bank Rate at 7.75 per cent.

Assessment

2. Since the fifth bi-monthly statement of December 2015, global growth has slowed, with the ongoing weakening of activity in major emerging market economies (EMEs) outweighing the recovery in some advanced economies (AEs). World trade has remained subdued, held down by anaemic demand, new lows in commodity prices and currency realignments. In the United States, an improving labour market continues to support a consumption-led recovery. Manufacturing activity is sluggish, however, reflecting retrenchment in oil and gas drilling activity and declining exports. In the Euro area, improving labour market and financing conditions are supporting consumer spending and business investment. Although core inflation and wage growth are subdued, deflation risks appear to be receding. In Japan, the combination of exceptional monetary accommodation and fiscal stimulus has failed to spur sustainable domestic demand so far. In Chin........