RBI Maintains Repo Rate, Urjit Patel Justified Rupee Decline Against Dollar

Governor Urjit Patel led MPC keeps repo rate unchanged at 6.50%, says rupee depreciation vs US dollar has been moderate vis a vis other emerging markets economies' currencies. Within minutes of announcing that the RBI is keeping the status quo on repo rate at the previous 6.50 per cent, Governor Urjit Patel faced the media and gave his explanation on various issues.

Ahead of all, Patel said, "Depreciation of Rupee against US Dollar has been comparatively moderate in comparison to currencies of other EMEs (emerging markets economies)," adding "The rupee's level should be decided by market forces."  Further, he said that in real terms, the rupee's depreciation has been around 5%.

Further, he added, "There is no target or band around any particular level of the exchange rate which is determined by the market forces of demand and supply."

Trade deficit has widened in the second quarter as imports grew at a faster pace than exports, the RBI governor said. He added that "FPIs have been net sellers of both equity and debt on a cumulative basis."

According to him, wage growth in rural and organised sector was contained, and the impact of increases in MSPs announced in July remains uncertain.

On services sector, he said, "Performance of the services sector in the second quarter of the year seems to be somewhat varied."

On the IL&FS issue, he said, "Will engage with the new management of IL&FS if necessary", adding "Government decisions in the IL&FS case have been timely and appropriate."