The Monetary Policy Committee (MPC) headed by RBI Governor Urjit Patel started its two day meeting (December 6 and 7, 2016) for the Fifth Bi-monthly Monetary Policy review for 2016-17. There are expectations of at least 0.25 percent policy rate cut in order to tackle the impact of demonetisation move by the central government.
This will be Patel’s second monetary policy review since he took over as RBI Governor. In its first meeting of the MPC that happened in October, it was decided to cut the policy rates under the liquidity adjustment facility (LAF) by 25 basis points to 6.25 per cent from 6.5 per cent. The RBI had since January 2015 reduced repo rate by 1.75 per cent with an aim to boost economic growth.
This policy review has become significant as it will be the first monetary policy review after demonetisation of old Rs 500 and Rs 1,000 currency notes, following which banks witnessed surge in deposits after which in a surprise move Reserve Bank of India's (RBI) ordered banks to transfer 100% of their cash under the central bank's cash reserve ratio (CRR) from deposits generated between September 16 and November 11.
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