First Bi-Monthly Monetary Policy - Views of Mr. Dinesh Thakkar, CMD - Angel Broking

"The RBI has slashed repo rate by 25bps to 6.5% in line with our expectations. This has been the lowest rates in the last five years and certainly a positive move for the economy. Apart from the above rate cut the RBI has addressed the very important issue of liquidity shortage faced by banks, which will help them easy access to funds for their lending operations. Though CRR has been left unchanged at 4%, the central bank has taken several steps to induce liquidity into the system, like it has reduced the minimum daily maintenance of the Cash Reserve Ratio (CRR) from 95% of the requirement to 90%. It has also reduced marginal standing facility (MSF) rate by 75 bps from 7.75% to 7%. Further on a positive side the RBI has also raised the reverse repo rate from 5.75% to 6%. As a result, the difference between the repo and reverse repo rates has come down from 1% to 0.5%. We believe that there was already a down trend in interest rates scenario with the implementations of MCLR and with the current rate cut there will be further easing in lending rates, which should help credit growth picking up. Lastly the RBI has retained its CPI inflation projections at 5% for FY17 and GDP growth at 7.6%. Overall we believe the RBI has acted as per the need of the hour and further policy moves will depend on how monsoon pans out."

Source : Equity Bulls

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