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RBI keeps repo rate unchanged at 7.75%, says no new developments in disinflationary process

NetIndian News Network

New Delhi, February 3, 2015

The Reserve Bank of India (RBI) today decided to keep its key policy repo rate under the liquidity adjustment facility (LAF) unchanged at 7.75 per cent, saying there had been no substantial new developments on the disinflationary process or on the fiscal outlook since January 15 when it had cut the rate by 25 basis points.
In his Sixth Bi-Monthly Monetary Policy Statement 2014-15, RBI Governor Raghuram G. Rajan also said that the cash reserve ratio of scheduled bans unchanged at 4.0 per cent of net demand and time liabilities (NDTL).
He said the statutory liquidity ratio (SLR) of commercial banks would be reduced by 50 basis points from 22.0 per cent to 21.5 per cent of their NDTL with effect from the fortnight beginning February 7.
The RBI has decided to replace the replace the export credit refinance (ECR) facility with the provision of system level liquidity with effect from February 7, 2015, he said.
It will continue to provide liquidity under overnight repos of 0.25 per cent of bank-wise NDTL at the LAF repo rate and liquidity under 7-day and 14-day term repos of up to 0.75 per cent of NDTL of the banking system through auctions.
It will also continue with daily variable rate term repo and reverse repo auctions to smooth liquidity, he said
Consequently, the reverse repo rate under the LAF will remain unchanged at 6.75 per cent, and the marginal standing facility (MSF) rate and the Bank Rate at 8.75 per cent, he said.
Stating that the momentum of inflation had significantly reduced, the RBI had on January 15, outside the policy review cycle, reduced the repo rate by 25 basis points from 8.0 per cent to 7.75 per cent.
"Given that there have been no substantial new developments on the disinflationary process or on the fiscal outlook since January 15, it is appropriate for the Reserve Bank to await them and maintain the current interest rate stance," Dr Rajan said today.

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