InvestorQ : What were the major things to know in the monetary policy announced by the RBI on 07 August and what does it mean for the markets?
Riya Dwivedi made post

What were the major things to know in the monetary policy announced by the RBI on 07 August and what does it mean for the markets?

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rhea Babu answered.
1 year ago
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There were some interesting highlights of the monetary policy on the rates front, inflation outlook and on the growth outlook. Here are some of the key highlights.

· Repo rate was cut by 35 bps to 5.40%. This was the first time the RBI rate change was not in multiples of 25 bps and an odd number was chosen.

· Consequently, you have the reverse repo rate at 5.15% while the bank rate and the Marginal Standing Facility (MSF) rate are at 5.65%. Both are pegged to repo rates.

· There were 2 rate hikes in June and August 2018 of 50 bps and subsequently, rates were cut by 110 bps leading to a net reduction of 60 basis points in rates since 2018.

· The RBI downgraded the GDP growth rate to 6.9%, which is what CRISIL had projected in the previous week. That is what actually hit the market sentiments.

· MPC underscored its monetary stance as accommodative (same as last policy); indicating it would be open to further rate cuts if data was supportive.

· RBI has guided for inflation at less than 4% through the year despite risks on the food inflation front due to weak monsoons.

· Four out of six members voted for a 35 bps rate cut and two for a 25 bps rate cut. The decision to maintain accommodative stance was unanimous.

· From December 2019, the RBI will make NEFT a 24 hour service. This will not extend to RTGS, which is applicable to transfers above Rs.2 lakhs.

· RBI has also announced measures to enable the easy flow of credit to the non banking finance companies; that are currently stretched.


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