RBI's third policy review: Repo Rate retained, reverse Repo increases

Mumbai: Leaving its Repo rate unchanged at 6.25 per cent, the Reserve Bank of India, on Thursday, increased the reverse Repo rate by 0.25 per cent or 25 bps.

The reverse Repo rate which was 5.25 per cent earlier was increased to 6 per cent in the third policy review, which has narrowed the policy lending corridor.

The central bank stated, “given the upside risks to inflation and excess liquidity in the system, the benchmark lending rate has been retained at 6.25 per cent but the reverse repo and MSF have been revised upwards by 0.25 per cent.

The central bank assured that the policy decisions are unanimous. It stated that on the basis of gross value added, RBI sees the economy accelerating to 7.4 per cent in the current fiscal, up from 6.7 per cent in 2016-17.

The monetary authority, however, said that the monetary policy committee is worried on three fronts on the inflation and the general economy, namely, the impact of the monsoon, implementation of GST and the seventh pay commission award.

“For 2017-18, inflation is projected to average 4.5 per cent in the first half and 5 per cent in the second half," the RBI said.