Third Bi-Monthly Monetary Policy Statement on August 4 , 2015 by Governor Rajan: outlook unchanged, repo rate on hold

Some differentiated bank licenses could be announced this month

RBI Watch                                                                                    Monetary Policy 2015-16

Given no significant change in its economic outlook for 2015-16, national output growth at 7.6% and inflation by January – March 2016 at about 6%, the RBI made no change in the repo rate.

The table below gives the RBI’s key monetary rates and ratios as of August 4, 2015, and the changes over the last one year. 

A 0.75% fall in the repo rate – the rate at which banks borrow from the RBI – and a 1% fall in the statutory liquidity ratio – the compulsory investment by banks in government securities - are the highlights of the last one year. Monetary policy is in an easing mode: the RBI has been making borrowing money cheaper, and encouraging banks to lend more.

In the meeting with media, Governor Rjan revealed his thoughts on the Monetary Policy Committee - more on this in a separate blog, which will come out shortly.

On RBI’s new initiative of Small Finance Banks and Payments Banks, Rajan revealed that he hopes to announce one set of licenses (Payment Bank or Small Finance Banks or both?) by the end of this month. Another positive development was his announcement that RBI and Government are working on a Medium Term Framework regarding the investments by Foreign Portfolio Investors in the bond market.