Coal news and updates

Reserve Bank cuts repo rates by 25 basis points

Reserve Bank of India (RBI), on April 5, cut its policy interest rate or repo rate or the rate at which it lends money to the system by 25 basis points to 6.50%, reducing it to a more than 5-year low while dangling the prospect of another cut later this year if inflation trends stay benign. 

"Borrowing rates are coming down significantly in this economy," RBI Governor Raghuram Rajan told a news conference following the policy review. "My hope is that we will see significantly more transmission over the next few months." 

The RBI said its policy would remain "accommodative", raising the prospect of another 25 bps rate cut later this year, saying inflation was moving towards its 5% target in March 2017. Its next target will be 4.2 percent by March 2018.

The cut was broadly in line with expectations. However, the stock market reacted negatively and the BSE index, Sensex, was down nearly 300 points.                                                                 

The policy said the average overnight borrowings by banks have increased to Rs 1,935 billion in March from Rs 1,345 billion in January. Stating that the inflation objectives are closer to being realised and price-rise will hover around the 5% mark for the remainder of the fiscal, Rajan reaffirmed that the monetary policy will continue to remain accommodative to address the growth concerns.

The RBI also retained its GDP growth forecast at 7.6%, on the assumption of a normal monsoon and a boost to consumption through the implementation of the Seventh Pay Commission recommendations.

The central bank said it expects the implementation to hurt inflation by 1-1.5% over a two-year period, but added that the shock will not be as strong as that felt during the implementation of the sixth pay panel suggestions.

Rajan welcomed the government move to amend the RBI Act to create a monetary policy committee, saying it will further strengthen the policy's credibility.

He also welcomed the government’s adherence to the path of fiscal consolidation, calling it a commendable commitment this will support the disinflation process, going forward.