The Reserve Bank of India (RBI) will announce key policy rates today after the conclusion of the three-day meeting of Monetary Policy Committee (MPC). The expectation is the regulator will hold the repo rate at 6 per cent, and could change its stance from neutral to accommodative.Also Read - Indian Foreign Reserves Fall USD 2.71 Billion
The policy will be closely watched as the economy has started to revive after the twin-blow of demonetisation and Goods and Services Tax (GST). Gross Domestic Product (GDP) grew by 7.7 per cent during January-March 2018 compared with 5.6 per cent growth in Q1, 6.3 per cent in Q2 and 7 per cent in Q 3 of 2017-18. This is the highest growth recorded in the last three quarters. For the full Financial Year 2017-18, gross domestic product (GPD) grew by 6.7 per cent. Any increase in policy rates can slow down the economic growth rates with an increase in the cost of lending. Also Read - ATM Cash Withdrawals to Cost More From THIS Date. Check New Charges, Other Details Here
While the economy is growing, retail inflation has also increased on the back of rising global crude oil prices. Retail inflation increased to 4.58 per cent in April, which may push the regulator to increase repo rate. Repo rate is currently at 6 per cent. The Wholesale Price Index (WPI) based inflation, too, rose to 3.18 per cent in April. Also Read - Private Cryptocurrencies in India May Not be Banned, Will Be Regulated: Report
Corporate governance can also be discussed given the ongoing turmoil in ICICI Bank. Depreciating rupee along with bad debts have also been a cause of concern for the banking regulator. The rupee has already depreciated by 3 per cent in the last couple of months, crossing 68 per dollar. With bad debts on the rise, the monetary policy commentary will be closely watched.