RBI drift from rate focus, targets cash surplus, health of banks

The Reserve Bank of India (RBI) on Thursday maintained status quo on policy rate by leaving the repurchase rate (or repo rate) unchanged at 6.25 per cent in its first bimonthly policy of FY18. The central bank also kept the cash reserve ratio unchanged at 4 per cent. However, it raised the reverse repo rate by 25 basis points to 6 per cent. RBI Governor Urjit Patel called it the central bank’s first line of defence to deal with a flood of liquidity in the system.

It also revised the MSF to 6.5 per cent from 6.75 per cent. The marginal standing facility is a window for banks to borrow from the Reserve Bank of India in an emergency situation when inter-bank liquidity dries up completely.

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