RBI Credit Policy, Finance Minister holds interest rates unchanged

RBI Credit Policy, Finance Minister holds interest rates unchanged

The Reserve Bank of India (RBI) today decided to leave interest rates unaffected 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.

At its bi-monthly monetary policy review meeting, RBI left interest rates unchanged at 7.5 percent. It also decided to leave the statutory liquidity ratio (SLR) and cash reserve ratio (CRR) unchanged at 21.5 percent and 4 percent, respectively.

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 and CRR are the 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 cuts, further data on inflation, shift in the quality of government spending, and for the Federal Reserve’s moves on interest rate in the US.

The government and the central bank recently signed an agreement in which the latter would formulate monetary policy with the aim of achieving specific inflation targets. “The Monetary Policy Framework Agreement signed by the Government of India and the Reserve Bank in February 2015 will shape the stance of monetary policy in 2015-16 and succeeding years,” the central bank said in a statement.

The RBI will stay focused on making certain that the economy disinflation gradually and strongly, with CPI inflation targeted at 6% by Jan 2016 and at 4% by the end of 2017-18.