Credit policy highlights: 2016-17

Here are the highlights of the policy statement presented on 7 June and last six preceding

Each year the Reserve Bank of India issues six bi-monthly statements on monetary policy. Given below are the highlights of the policy statement presented yesterday (7 June 2017) and last six preceding monetary policy statements. 

Key highlights of the June 2017 policy statement

• Repo and reverse repo rates unchanged at 6.25% and 6%, respectively
• Statutory Liquidity Ratio (SLR) cut by 0.5% to 20% 
• Growth forecast for 2017-18 lowered to 7.3% from 7.4% 
• Inflation projected between 2 and 3.5% for H1, 3.5 and 4.5% H2 in the current  fiscal
• GST roll out will not have a negative impact on inflation 
• Policy stance remains neutral 
• Farm loan waivers may lead to fiscal slippages and inflationary spillovers 
• Unlike the earlier policies which were unanimous, this time five MPC members voted in favour of status quo on monetary policy, with one (deputy governor Ravindra Dholakia) dissent.

Key highlights of the April 2017 policy statement

• Policy repo rate remained unchanged at 6.25% 
• Reverse repo hiked to 6%
• Narrowed policy rate corridor due to increased liquidity on account of demonetisation
• Gross Value Added growth pegged at 7.4% for current fiscal
• MSF, bank rate revised to 6.5%
• Retail inflation in first half seen at 4.5%, 5% in second half

Key highlights of the February 2017 policy statement

• Policy repo rate kept unchanged at 6.25%
• Economic growth forecast for FY17 lowered to 6.9%  
• 2017-18 growth pegged at 7.4% 
• Growth is expected to recover sharply in 2017-18.
• Retail inflation in Q4 likely to be below 5%
• Inflation projected in the range of 4-4.5% in the first half of 2017-18 and 4.5-5% in the second half.
• RBI changes policy stance from accommodative to neutral
• Surplus liquidity to fall with progressive remonetisation; abundant liquidity with banks may persist in early 2017-18.

Key highlights of the December 2016 policy statement

• Repo rate unchanged at 6.25% 
• Reverse repo at 5.75%
• Cash reserve ratio (CRR) unchanged at 4% but said it will withdraw the temporary 100% hike in the CRR announced in November in the fortnight beginning 10 December
• Growth forecast cut to 7.1%, from 7.6% for 2016-17 fiscal.
• Inflation target at 5% for March 2017
• Demonetisation to lower the prices of perishables and reduce inflation by 10-15 basis points; demonetisation to result in short-run disruptions in cash-intensive sectors

Key highlights of the October 2016 policy statement

• Repo rate cut by 0.25% to 6.25%, Reverse Repo at 5.75%
• Cash reserve ratio or CRR unchanged at 4%
• Growth forecast at 7.6% for the 2016-17 fiscal
• Normal monsoon to quicken growth momentum
• Inflation target remains 5% for March 2017
• 6-member Monetary Policy Committee’s first collective interest rate decision

Key highlights of the August 2016 policy statement

• Key policy rate (repo) kept unchanged at 7.2 per cent
• Cash reserve ratio (CRR) unchanged at 4 per cent
• Economic recovery is still “work in progress”
• After strong rainfall in June, July has been below par, but overall monsoon is near normal
• Hardening of inflation except food and fuel termed “worrisome”
• Signs that consumption demand in urban areas picking up

Key highlights of the June 2016 policy statement

• Repo rate unchanged at 6.50 per cent
• Reverse Repo at 6% 
• Cash reserve ratio or CRR unchanged at 4%
• Monetary policy to remain accommodative
• Growth forecast at 7.6% for the 2016-17 fiscal
• Inflation target kept unchanged at 5% for January 2017 with upward bias

Key highlights of the June 2016 policy statement

• Repo rate cut by 0.25% to 6.50%
• Reverse repo hiked by 0.25% to 6%
• Cash reserve ratio or CRR unchanged at 4%
• Minimum daily cash maintenance by banks with RBI cut by 5%
• MSF rate cut by 0.75% to lower banks’ borrowing cost
• Policy to remain accommodative going forward
• 2016-17 growth forecast at 7.6%
• Expects inflation at around 5%
• Cut in small savings rate, MCLR introduction to improve monetary policy transmission
• 7th Pay Commission award to put upward pressure of up to 1.5% on inflation
• Proposes custodian banks; banks focusing on wholesale and long term financing