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RBI keeps interest rates, CRR unchanged

News18test sharma |

Updated: July 31, 2012, 11:11 AM IST
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RBI keeps interest rates, CRR unchanged
The RBI said that lowering policy rates now would only aggravate inflationary impulses without stimulating growth.

New Delhi: The Reserve Bank of India (RBI) in its April-June quarter monetary policy on Tuesday left the key policy rates unchanged. However, it has cut the statutory liquidity ratio (SLR) to 23 per cent from 24 per cent earlier. This policy action was by and large in-line with CNBC-TV18 poll. Now, the repo rate or the rate at which banks borrow from RBI remained at 8 per cent while the reverse repo rate at which, the banks lend to RBI at 7 per cent.

SLR is the percentage of total deposits that lenders need to invest in the government bonds. The reduction is aimed at ensuring free flow of credit growth through enough liquidity in the system.

Cash Reserve Ratio or CRR is the portion of total deposits that banks are required to keep with the central bank also remained unchanged.

"In the current circumstances, lowering policy rates will only aggravate inflationary impulses without necessarily stimulating growth," RBI Governor Duvvuri Subbarao wrote in the monetary policy review, adding the central bank's primary focus remains inflation control.

A survey by professional forecasters conducted by RBI has showed a moderation in India's GDP growth outlook to 6.5 per cent from 7.2 per cent earlier. Domestic growth declined to its lowest in 29 quarters at 6.50 per cent during Q4 of 2011-12. However, the average inflation outlook revised upward at 7.3 per cent for FY13.

Interestingly, India is ranked lowest in rating among all BRIC countries. In its macroeconomic policy, RBI alerted the government of the need to revive investment climate. This can be done through policy actions like removal of bottlenecks in infrastructure sector, liberal foreign direct investment norms and so on.

After a gap of nearly three years, RBI had cut policy rates in annual monetary policy announced on April 17 by 50 bps.

First Published: July 31, 2012, 11:11 AM IST
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