RBI keeps key rates unchanged; hikes banks' liquidity reserve ratio
27 Oct 2009
The Reserve Bank of India has kept all key interest rates unchanged while announcing the second quarter review of its monetary poly for fiscal 2009-10. The RBI, however, said the economy is awash with liquidity and that the economy is under further strain due to inflationary pressures.
RBI kept its key lending rate, the Bank Rate, unchanged at 6.0 per cent and retained the repo rate under the liquidity adjustment facility (LAF) at 4.75 per cent. The reverse repo rate under the LAF has also been kept unchanged at 3.25 per cent.
The cash reserve ratio (CRR) of scheduled banks has been retained unchanged at 5.0 per cent of their net demand and time liabilities (NDTL).
The central bank, however, hiked the statutory liquidity ratio (SLR) for scheduled commercial banks to 25 per cent from 24 per cent of their net demand and time liabilities (NDTL) with effect from the fortnight beginning 7 November 2009.
Scheduled commercial banks are currently maintaining SLR investments at 27.6 per cent of their NDTL, net of LAF collateral securities, and 30.4 per cent of NDTL, inclusive of LAF collateral securities. As such, the increase in the SLR will not impact the liquidity position of the banking system and credit to the private sector, RBI said in a release.
RBI said it has the flexibility to conduct repo/reverse repo auctions at a fixed rate or at variable rates as circumstances warrant. The central bank said it would continue to use this flexibly, including the right to accept or reject tender(s) under the LAF, wholly or partially, so as to make efficient use of the LAF in daily liquidity management.
