RBIs Monetary Policy

September 2014:
In line with market expectations, Reserve Bank of India on Tuesday kept the repo rate
unchanged at 8%. They also kept CRR (4%), SLR (22%) unchanged. The reverse repo
rate was also maintained at status quo of 7%. The market expected a cut in SLR, a cut
in the HTM (held to maturity) bond portfolio, and an easing of the daily CRR
requirement of 95%.
None of this has materialized some good, some not so good.
The governor said that RBI will cut the HTM ceiling from the current 24 percent to 22
percent in stages, in the bi-weekly cycle beginning Jan. 10, 2015. It expects to
complete the process by September 2015.
He also reduced the liquidity provided under the export credit refinance (ECR) facility
from 32 per cent of eligible export credit outstanding, to 15 per cent with effect from
October 10, 2014.
RBI said, that the future policy stance will be influenced by the Reserve Bank's
projections of inflation relative to the medium term objective (6 percent by January
2016), depending upon incoming data. RBI also maintained the economy's growth
projections for the current fiscal at 5.5%.

Our View:
RBI has maintained its calibrated approach on key policy rates. One thing which is very
clear is RBIs focus on inflation, to ensure sustainable long term economic growth. The
next monetary policy will be announced in November 2014.

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