RBI to announce monetary policy review today

Reserve Bank of India will announce its monetary policy review today. It will be announced in the afternoon at 2.30 PM against the existing practice of 11 AM.This will be Mr Urjit Patel’s maiden policy announcement as RBI Governor. Unlike his predecessor Raghuram Rajan who had the final say on interest rate cut decisions, Mr Patel will have to go by the advice of a newly set up six-member monetary policy committee (MPC). 

This is for the first time that decision-making on interest rates will shift to the six-member panel which has equal representation from RBI and the government. 

Since January last year, the RBI has cut the



repo rate - the rate at which RBI lends to banks - five times. India’s retail inflation has touched a five-month low of 5.05 percent in August, triggering hopes of a rate cut. 

The RBI and the government have set a retail inflation target of 4 percent for the next five years with an upper tolerance level of 6 percent and lower limit of 2 percent. Most analysts expect a status quo on rates. Mounting bad loans will remain another focus area of Mr Patel’s debut policy review. Mr Rajan has set a deadline of March 2017 for banks to clean up their balance sheets.Mr Patel has to ensure that there is no let-up on this cut-off date.