Mumbai: The RBI which has brought down interest rates by 1.75 per cent since January 2015 kept rates unchanged on Wednesday as it was waiting to see the repercussions of the demonitisation of the Rs 500 and Rs 1,000 currency notes, and the impact of global uncertainty caused by the possibility of the US Fed tightening monetary policy after the victory of Donald Trump as president-elect.
RBI also revised downwards the GDP growth from 7.6 per cent to 7.1 per cent for 2016-17 after the unexpected loss of momentum by half a per cent or 50 basis points in the July-September quarter, and the effects of the withdrawal of the Rs 500 and Rs 1,000 notes which are still to play out.
The good news was that banks could in the future reduce rates on home loans and bring down EMIs as they are flushed with funds following the return of the impounded cash though the cash reserve ratio (CRR the portion of its deposits that banks have to keep with the RBI) following demonitisation of some currency notes.
The NPAs of banks has decreased and there was improvement in recoveries and write-offs were reduced, the bank said. On the shortage of currency notes and the problems caused by the high denomination Rs 2,000 currency, the RBI said that “this problem was on top of the mind” and the presses were working to full capacity.
Between November 16 and December 5, the RBI had supplied four lakh crore of lower denomination notes of '10 and '20 which was equivalent to 19.1 billion pieces more than the whole of the last three years. It hoped that people would switch to digital mode.
Announcing the bi-monthy policy statement on Wednesday, RBI governor Urjit Patel, who heads the Monetary Policy Committee (MPC), said it is “prudent to wait and watch” how factors like demonitisation, the downward inflexibility of inflation excluding food and fuel, and the impact of the US Fed tightening monetary policy which is triggering high bouts of volatility in financial markets effecting the emerging markets would play out. Most experts had predicted cuts.
