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Motilal Oswal Report
In an unexpected move, the Reserve Bank of India held an out-of-turn monetary policy meeting on May 02 and 04 2022 where it decided to hike the policy repo rate by 40 basis points to 4.4%.
Consequently, the standing deposit facility now stands at 4.15% and the marginal standing facility at 4.65%.
This is the first rate action by RBI since May 2020.
Its accommodative stance, however, has been kept unchanged. Both decisions – hiking the policy repo rate and keeping the stance unchanged – were unanimous.
In line with the April 2022 announcement of a gradual withdrawal of liquidity, RBI decided to increase the cash reserve ratio by 50 bps to 4.5% of net demand and time liabilities, effective from the fortnight beginning May 21, 2022.
This will suck out Rs 870 billion worth of liquidity from the market.
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