The much-awaited RBI’s sixth bimonthly monetary policy review was announced today. The policy delivered two major highlights:
1) The withdrawal limit has now been lifted. No limit on Withdrwal from March 13, which is when RBI expects good supply of cash into the economy. The Reserve Bank of India today said it will remove the cap on cash withdrawals from saving bank accounts in two phases. In the first phase, the withdrawal limit will be raised to Rs 50,000 from Rs 24,000 a week, effective February 20.
The limits on cash withdrawals from savings bank account will be withdrawn completely from March 13. As of now, there is no limit on current account and there is a cap of Rs 50,000 for farmers a week and Rs 2.5 lakh for marriage.
Post the note ban on November 8, Reserve Bank had imposed withdrawal limits on ATMs and bank branches. It increased limits from Rs 2,000 a day to Rs 4,500 a day to Rs 10,000 a day while maintaining the overall weekly ceiling of Rs 24,000.
2) The second major highlight was an unchanged repo rate, as against market expectations. The Reserve Bank of India has kept the short-term lending rate, or repo rate, unchanged at 6.25 percent, thereby opposing market sentiments. The news of unchanged rates didn’t have much adverse effect on the market. Sensex slipped by 1.6% to reach 28,173. Nifty dropped 0.5% to reach 8723.
The RBI policy maintained a Status Quo, and didn’t deviate from the current rates. The RBI governor also spelled out that the policy is accommodative.
This RBI policy has also engendered a red flag for further rate-cuts. It spells out reluctance for major reliefs in terms of repo rates in future.