New Delhi: The Monetary Policy Committee (MPC) in its fifth bi-monthly policy review on Wednesday will take important decisions on its key lending rates which currently stand at 6.5 percent.
The repo rate and cash reserve ratio (CRR) currently stand at 6.5 percent and 4 percent, respectively.
Repo rate is the rate at which banks borrow short term funds from the Reserve Bank of India (RBI), while CRR is the share of a bank's total deposits that it has to keep in a current account with the central bank.
The six-member MPC, headed by RBI Governor Urjit Patel, is meeting from December 3-5 to review the fifth bi-monthly policy review of 2018-19.
Here’s a list of things to watch out for as the review comes to a close:
Repo rate:
The policy repo rate will be key, given the dynamic global and domestic factors, including easing inflation, lower oil prices, appreciating Indian rupee and slower GDP growth.
Monetary policy stance:
Policy stance, which is currently tuned into ‘calibrated tightening’, and the tone of the policy will be a key factor for interest rate movement going forward. Analysts expect the tone to be less hawkish than before. Many also expect the stance to be changed back to ‘neutral’ from ‘calibrated tightening’.
Centre-RBI spat:
The MPC is meeting for the first time after a rift between the government and RBI became public. It needs to be seen if the RBI Governor gives a commentary on the same. The central bank had agreed to restructure loans for micro and small loans up to Rs 25 crore and also set-up a panel to discuss the issue of transfer of surplus reserves to the government.
Liquidity:
Given the tight liquidity conditions, there could be some confidence building measures to inject capital and commentary on the liquidity front.
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