Monetary Policy - June 2017 - CSEC Research

In-line with the expectations; RBI maintains status quo

RBI Policy Highlights:

- Policy repo rate under the liquidity adjustment facility (LAF) remains unchanged at 6.25%.

- The reverse repo rate under the LAF stands at 6.0%, and the marginal standing facility (MSF) rate and the Bank Rate stands at 6.5%.

- Cash reserve ratio (CRR) remains unchanged at 4%.

- Out of six members of MPC, five were in favour to hold rates except Dr. Ravindra H. Dholakia.

- Statutory Liquidity ratio (SLR) stands reduced by 50bps to 20% of NDTL (Net demand and time liabilities).

- The Central Statistics Office (CSO) released its provisional estimates for 2016-17 on May 31, placing India's real GVA growth at 6.6% for the year, down from 6.70% (second advance estimates released on February 6).

- RBI has revised its projection of CPI Inflation to 2-3.5% in 1HFY18 & 3.5-4.5% in 2HFY18 from 4.5% & 5% respectively and cuts the real GVA growth estimates by 10bps to 7.3%.

Outlook:

MPC has kept the policy rate unchanged and maintained their neutral stance on the back of concerns around revival in private investment, health of banking sector & bottlenecks in Infrastructure. However, with such revisions in projections of Inflation, RBI has created a room for the future rate cuts. We expect RBI to cut 25bps in 2HFY18.

Source : Equity Bulls

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