As part of its monetary policy review, the RBI made some major announcements today, some of which were welcomed whereas others were given a thumbs down. For everyone facing cash problems due to demonetization, the RBI has provided relief by scrapping the cash withdrawal limit, which would be effective from March 13. Before this, the withdrawal limit will be raised to Rs 50,000 from February 20. This announcement has been welcomed by everyone.
However, the markets were not so lucky, as the RBI has decided to keep the repo rate unchanged at 6.25%. Expectations were high for a rate cut, but RBI has decided not to go for it. RBI said that the decision has been taken in line with the goal to achieve consumer price index (CPI) inflation at 5 per cent by Q4 of 2016-17 and the medium-term target of 4 per cent within a band of +/- 2 per cent, while supporting growth.
RBI has also reduced the GDP growth forecast from 7.1% to 6.9% for financial year 2016-2017. However, the central bank noted that economy will pick up pace in the next financial year, which will propel GDP growth to 7.4%.
Meanwhile, there are indications that demonization can force banks to reduce interest rates on savings account. Banks have garnered massive funds due to demonetization, which may force them to cut interest rates on savings accounts. If this happens, it would be another blow to the common man who has gone through so many hardships in the last couple of months.