RBI to hold maiden monetary policy review post-demonetisation today

The Reserve Bank of India (RBI) will announce monetary policy review later in the day, the first after demonetization of old Rs 500 and 1000 notes, amid expectations of interest rate cut.

Ahead of the policy statement, the six-member Monetary Policy Committee (MPC) met on Tuesday amid widespread expectations of at least 0.25% (25-basis point) cut in the policy rate to cushion the impact of demonetization.

This is the second meeting of MPC headed by RBI Governor Urjit Patel after the first in October, when it had cut repo, or the short-term lending rate, by 0.25% to 6.25%.

RBI has reduced the policy rate by 1.75% since January 2015.

If RBI cuts rates on Wednesday, it will be for the second time that the monetary policy would be based on the recommendation of the MPC.

There are expectations of a rate cut in repo as banks are flushed with funds following demonetization of old high value notes from November 9.

RBI has already taken a host of steps, including 100% incremental increase in Cash Reserve Ratio, CRR, to suck out excess liquidity from banks.