Along expected lines: Policy rates unchanged

MUMBAI,  4 October,  2017 (GPN) : The policy was more or less along expected lines. Key policy rates have been kept unchanged due to upside bias to inflation.  In fact, CPI has been slightly revised to 4.2%–4.6% due to impact of crude and HRA effect in lieu of 7th CPC recommendations. GVA growth has also been scaled down to 6.7% from 7.3% possibly due to low capacity utilization.

A major announcement was the cut in SLR from 20% to 19.5% w.e.f October 14, 2017 and cut in HTM limit to 19.5% by March 2018. SLR cut will notionally release Rs.50,000 Cr systemic liquidity but banks are anyway holding excess SLR. This can be used for LCR purposes. HTM cut provides more flexibility to churn portfolio to the banking system.

In short, the MPC has acknowledged upward inflationary bias while also being mindful of downside risks to growth due to various domestic and international macroeconomic factors.