RBI keeps interest rates unchanged

Ignoring pressure from the Government to reduce the cost of borrowing, RBI Governor Raghuram Rajan on Tuesday kept interest rates unchanged citing a spike in food prices and banks passing on to consumers only less than half of its previous rate cuts.

In his third bi-monthly policy of the fiscal, Rajan left benchmark lending (repo) rate unchanged at 7.25 per cent as also the cash reserve ratio (CRR) at 4 per cent.

The RBI has already reduced the policy rate by a total of 75 basis points, or 0.75 per cent, since January, when it embarked on an easing cycle. The banks, however, have passed on only 0.3 per cent to borrowers, Rajan said.

“Given that policy action was front-loaded in June, it is prudent to keep the policy rate unchanged at the current juncture while maintaining the accommodative stance of monetary policy,” he added.

x