RBI maintains status quo on key repo rates

RBI maintains status quo on key repo rates

The RBI has kept the policy repo rate under the liquidity adjustment facility (LAF) unchanged at 6.

It also kept the reverse repo rate unchanged at 5.75 percent. This can not but be a cause for concern and explains why one of the five MPC members (considered a hawk) in fact asked for an increase in the policy repo rate by 25 basis points.

The RBI circular on analysis means that regulated entities such as banks, payment companies, and processing companies will not provide services to those dealing with Virtual Currencies.

MPC, headed by RBI Governor Urjit Patel, revised upwards its forecast of real GDP growth from 7.2 per cent in its February Statement to 7.4 per cent, which the ministry said is "broadly in line with the forecast in the Economic Survey". Similarly, metal prices are also firmer.

"This will cause panic among a few million people in India who are already using cryptocurrrencies [sic]".

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"In view of the associated risks, it has been decided that, with immediate effect, entities regulated by the RBI shall not deal with or provide services to any individual or business entities dealing with or settling virtual currencies", it said.

In another decision, the RBI asked all payment system operators to ensure that data related to payment systems operated by them are stored only inside India within a period of six months.

The RBI's decision to lower its full-year FY19 inflation forecasts was a surprising move, suggesting no imminent rate hike risks. "These are issued by the central bank, are considered the liability of the central bank", he said. The repo rate, at which the central bank lends short-term money to other banks, will continue to stay at 6 percent. But as with all central bank policy statements, it is not only the action but also what is said that is closely scrutinised for clues on what may lie ahead. Based on this projection, the Monetary Policy Committee noted that the output gap is closing but the long-term growth potential is likely to be strengthened by structural reforms. If at all, it seems to suggest that inflationary pressures may intensify.

When examining both the RBI's press release banning dealing with cryptocurrencies and the Deputy Governor's statement, it isn't hard to connect the dots. "The MPC has prudently voiced concerns about the possible interplay of domestic and global risk factors that could play out over the medium term".

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