RBI keeps policy rate unchanged at 8%

1.    RBI keeps policy rate unchanged at 8%

i. Despite intense pressure and widespread anticipation, the Raghuram Rajan-led Reserve Bank of India (RBI) has decided to keep the policy rate unchanged.

ii. The Reserve Bank of India (RBI) has kept the policy repo rate under the liquidity adjustment facility (LAF) unchanged at 8.0 per cent.  It has also decided to keep the cash reserve ratio (CRR) of scheduled banks unchanged at 4.0 per cent of net demand and time liabilities (NDTL).

iii. However, it has reduced the statutory liquidity ratio (SLR) of scheduled commercial banks by 50 basis points from 23.0 per cent to 22.5 per cent of their NDTLwith effect from the fortnight beginning June 14. 

iv. The RBI has also reduced the liquidity provided under the export credit refinance (ECR) facility from 50 per cent of eligible export credit outstanding to 32 per cent with immediate effect.

v. However, it has introduced a special term repo facility of 0.25 per cent of NDTL to compensate fully for the reduction in access to liquidity under the ECR with immediate effect.

vi. The apex bank has also decided to continue to provide liquidity under 7-day and 14-day term repos of up to 0.75 per cent of NDTL of the banking system.

vii. Consequently, the reverse repo rate under the LAF will remain unchanged at 7.0 per cent, and the marginal standing facility (MSF) rate and the Bank Rate at 9.0 per cent.

Note: The third bi-monthly monetary policy statement is scheduled on August 5th.

2.    Sahoo panel for opening IDR window to other instruments too

i. The Finance Ministry-appointed Sahoo panel is all set to make a case for expanding the scope of Indian Depository Receipts for Indian investors.

ii. In its report to be submitted to the Finance Ministry later this week, the panel is likely to recommend that IDRs be allowed not only against equity shares, but also against all financial instruments.

iii. The current legal framework on IDRs stipulates that such instruments can be issued only against underlying equity shares.

iv. If the Government accepts this recommendation, then an Indian investor will get to invest in any IDR which has corporate bonds or exchange-traded funds as underlying equity.

v. IDRs are receipts denominated in Indian rupees, created by a domestic depository against the underlying equity shares of an issuing company.

3.    Rural Development Minister Gopinath Munde passes away

i. Union Rural Development Minister Gopinath Munde died in a road accident in Delhi on Tuesday morning. Soon after the accident at around 6.20 am, Mr. Munde was rushed to the AIIMS.

ii. According to the post-mortem report, the Union Minister had no spontaneous breathing, pulse, BP, and cardiac activitiy. CPR was given for 50 minutes. However, he was declared dead at 7.20 am.

iii. Mr. Munde, a senior politician from Maharashtra, was sworn in as the Cabinet Minister for Panchayati Raj, Drinking Water and Sanitation and Rural Development on May 26.

iv. He was also till recently in the reckoning for the position of Maharashtra Chief Minister.

v. Mr. Munde was the brother-in-law of late BJP leader Pramod Mahajan. Born on December 12, 1949 in Bheed, Mr. Munde came from a family of farmers and during his college days was drawn to the students' movement.

v. Mr. Munde was a Member of Legislative Assembly (MLA) for five terms during 1980-1985 and 1990-2009. He was also the Leader of Opposition in Maharashtra Legislative Assembly during 1992-1995. He has held the post of Deputy Chief Minister of Maharashtra in 1995-1999. He was elected to Lok Sabha in 2009 and 2014, and served as the Deputy Leader of the BJP in the Lok Sabha.

vi. Mr. Munde won the 2014 Lok Sabha election from Beed Constituency by a margin of 2 lakh, defeating NCP's Suresh Dhas.