RBI First quarter Monetary Policy 2012-13 Review - Microsec Research

The Reserve Bank of India (RBI) has come out with its first quarter Monetary Policy (2012-13) review, albeit policy stance for this meet is in line with our as well as general consensus. The RBI has kept Repo Rate, Reverse Repo Rate under the liquidity adjustment facility (LAF) unchanged at 8.00% and 7.00% respectively, and the Marginal Standing Facility (MSF), determined with a spread of 100 basis points above the repo rate, stands at 9% and Bank Rate also unchanged at 9.00%. The RBI also left the Cash Reserve Ratio (CRR) unchanged at 4.75%. However, RBI has reduced the Statutory Liquidity Ratio (SLR) by 1% to 23%. Moreover, RBI also indicated that managing liquidity within the comfort zone remains an objective and the RBI will respond to liquidity pressure, including by the way of Open Market Operations (OMOs).

Uncertain global economic environment, upside risk on inflation owing to hike in fuel price coupled with poor monsoon and depreciating rupee and also, rising Current Account Deficit (India is not in position to afford even 2.5% of CAD in current year). All these factors mounted pressure on RBI not to touch the key rates this time.

Source : Equity Bulls

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