(MENAFN- KNN India) As expected, the Reserve Bank of India kept both Repo Rate and Cash Reserve Ratio (CRR) unchanged in its third Monetary Policy Review.
On the basis of an assessment of the current and evolving macroeconomic situation, it has been decided to keep the policy repo rate under the liquidity adjustment facility (LAF) unchanged at 7.25 per cent, RBI said in a statement.
Further, the RBI has kept the cash reserve ratio (CRR) of scheduled banks unchanged at 4.0 per cent of net demand and time liability (NDTL).
The apex bank will continue to provide liquidity under overnight repos at 0.25 per cent of bank-wise NDTL at the LAF repo rate and liquidity under 14-day term repos as well as longer term repos of up to 0.75 per cent of NDTL of the banking system through auctions, the statement said.
RBI will continue with daily variable rate repos and reverse repos to smooth liquidity, it added.
"Since our last statement, global economic activity has recovered modestly in Q2 of calendar 2015. The US economy rebounded on stronger consumption growth and steadily improving labour market conditions, though recent wage data suggest continuing slack. The Euro area has grown at a moderate pace through the first half of 2015, supported by consumer spending, easing financing conditions and a modest downturn in still-high unemployment. In Japan, growth slowed in Q2 after an upside surprise in Q1," RBI said.
Domestic consumption is still weak, but manufacturing activity picked up in July and strengthening exports and corporate profitability could stimulate capital spending in H2. In the emerging market economies (EMEs), activity decelerated through H1 due to headwinds from weak external demand, tightening external financing conditions, deteriorating structural bottlenecks and spill overs from unsettled conditions in financial markets.
Despite aggressive policy stimuli, the Chinese economy is slowing on macroeconomic rebalancing, sizable stock market corrections, a cooling property market and excess capacity in several manufacturing industries. Manufacturing activity weakened further in July, clouding near-term expectations. Recessionary conditions persist in both Russia and Brazil, with downside risks from commodity prices and geopolitical developments casting a shadow on the outlook, including for other EMEs, it added.
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