tiptrot.com June 20, 2018

RBI monetary policy: Highlights for the financial year 19

06 April 2018, 03:21 | Cedric Leonard

A man shows Rs 2000 notes in front of the Reserve Bank of India headquarter

10 factors that will impact RBI’s decision in first monetary policy review 2018-19

"The MPC made a decision to keep the policy repo rate on hold and continue with the neutral stance". The key Repo rate has been kept at 6 and other key parameters remaining the same has been widely expected while 5 out 6 members of MPC were neutral. Five of the six-member MPC voted for the decision, while one sought a hike.

Mumbai: All payment system players in India will now be required to store data within the country to ensure its safety and security, the Reserve Bank of India (RBI) announced on Thursday.

The Monetary Policy Committee (MPC) headed by RBI Governor Urjit Patel said that growth rate will accelerate to 7.4 percent in 2018-19, up from 6.6 percent last fiscal, ended March 31, mainly on account of revival of investment activity.

The weighted average call rate (WACR) inched closer to the policy repo rate from 12 basis points below the policy rate in January to 7 bps in February, and 5 bps in March.

The Deputy Governor of RBI, BP Kanungo, suspected that the rise of cryptocurrencies beyond a critical limit might bring financial instability.

Thursday's monetary policy further strengthened the optimism created by two recent events.

On the flip side, MPC noted that external demand could be adversely impacted if crude oil prices persists at elevated levels or even increase and trade protectionism intensifies.

Taking these factors into consideration, RBI revised CPI inflation for 2018-19 to 4.7-5.1% in H1:2018-19 and 4.4% in H2, including the HRA impact for central government employees, with risks tilted to the upside.

He added, "For the real estate sector, which has aligned to the government's ambitions, was looking for some encouragement that would move the needle towards accelerated growth". Changes in the repo rate affect bond yields and influence borrowing costs and loan rates.

"Residential sales across key markets of India in 2016-17, where only marginally higher by approximately 5% than new launches in the same period". There is pressure on the central bank to cut interest rates to boost retail inflation and boost growth.

Chief Economist and Executive Vice President, HDFC Bank termed the RBI's neutral stance as "dovish" as it highlighted inflation risks, but lowering its forecast for the same.

The MPC has maintained status quo for the fourth consecutive time since August previous year.

The move is likely to have a far-reaching impact on the payment ecosystem in India as surveys show that nearly 37 per cent respondents who made digital payments used these apps.

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