The Reserve Bank of India (RBI) today decided to leave interest
rates unchanged when it met for a bi-monthly review, after effecting two
out-of-cycle rate cuts earlier this year for 25 basis points (0.25 percent)
each.
As a result, the
headline repo rate, the rate at which the RBI lends to commercial banks,
continues to stand at 7.5 percent. The Raghuram Rajan-led central bank also
decided to leave the statutory liquidity ratio (SLR) and cash reserve ratio
(CRR) unchanged at 21.5 percent and 4 percent, respectively. The SLR (expressed
as percentage of net deposits to be kept in liquid assets) and CRR (percentage
of funds kept with the RBI) are also tools used by the central bank to adjust
liquidity in the system.
In its monetary policy
statement, the RBI said that it would prefer to stand pat in light of recent
signs of pick-up in economic activity and comfortable liquidity conditions, and
as it awaits transmission of the recent rate cuts into the economy, further
data on inflation, shift in the quality of government spending, and for the
Federal Reserve’s moves on interest rate in the US. For further insight into the RBI Policy and key takeaways from the RBI's Policy Document, click here.
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