The RBI announced its bimonthly monetary policy today, awaited by the traders to see its effect on the market. However RBI governor Raghuram Rajan kept the repo rate unchanged at 6.5 percent and reverse repo rate to 6 percent. Inflation is the major concern behind the unchanged of rates.
Raghuram Rajan kept the suspense over the second term to be announced later. Cash reserve Ratio remained same at 4 percent. RBI monetary policy is mainly in line with the government’s expectation of growth and inflation said the Finance Ministry.

We should know the terms we are talking about, what actually is the repo and the reverse repo rate? The answer for all those queries have a solution here. Repo rate is the rate at which the RBI gives the loan to banks when they have finished with their funds. To maintain the level of inflation, RBI takes the support of the Repo Rate. Reverse repo rate is the rate at which the RBI takes the loan from other banks, with this way RBI manages the supply of money all over the country. Generally to decrease the liquidity, RBI increases the reverse repo rate.The GDP growth target for the current fiscal has been retained at 7.6 percent by the RBI.

If monsoon persists good results, then interest rates can be decreased said the Governor. Increment in inflation is more than expected due to which rates of vegetables and fruits have stepped up. Also the commodity market is moving up, prices of all the commodities increased, especially of crude oil. RBI says rising crude prices and implementation of 7th pay commission pose upside risk to inflation. RBI urges the banks to improve provisioning coverages based on finances. With regard to retail inflation RBI retained today the January 2017 target at 5 percent.
The third bi-monthly policy will be announced on August 9, 2016.