Urjit Patel led RBI hikes repo rate by 25 bps; Guv says will remain vigilant going forward

The Reserve Bank of India's (RBI) Monetary Policy Committee (MPC), headed by Governor Urjit Patel, today hiked repo rate by 25 bps to 6.25 per cent after the conclusion of the second bi-monthly policy meet. Later addressing media persons, Urjit Patel cited inflationary pressures in emerging economies and said RBI "will continue to be cautious and vigilant going forward."
 
Patel said that for FY19, the forecast of a normal south-west monsoon augurs well for agriculture sector, as input cost pressures are firming up. He said cost of farm outputs has risen sequentially.
 
"Domestic economic activity has exhibited revival in recent times, he said, adding "farm loan waivers have been done through budgets of individual state governments, so there is no implications on banks' NPA." 
 
Urjit Patel also said that the monetary policy is determined by CPI. A neutral stance leaves all options open. Investment activity is estimated to be robust.
 
RBI deputy governor Acharya, however, said "time seemed right to raise rates by 25 basis points, adding food inflation has remained benign."
 
RBI deputy governor BP Kanungo said for standalone primary dealers, while RBI is not diluting their role in G-Sec market, effort is on to improve other activities of these entities.
 
In his reaction, RBI DG NS Vishwanathan said that urban cooperative banks will be given opportunity to convert to small finance banks; norms soon.

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Notably, Dr. Chetan Ghate, Dr. Pami Dua, Dr. Ravindra H. Dholakia, Dr. Michael Debabrata Patra, Dr. Viral V. Acharya and Dr. Urjit R. Patel voted in favour of the decision to hike repo rate after the conclusion of the second bi-montly policy meet. The minutes of the MPC’s meeting will be published by June 20, 2018, while its next meeting is scheduled on July 31 and August 1, 2018.