RBI leaves policy rates unchanged on Budget eve
15 Mar 2012
Having cut the cash reserve ratio (CRR) by 0.75 percentage points last week, the Reserve Bank of India kept its policy rates unchanged in its mid-quarter monetary policy review on Thursday.
Repo or the short term lending rate of the RBI now stands at 8.5 per cent. Consequently, the reverse repo rate under the LAF will remain unchanged at 7.5 per cent, and the marginal standing facility (MSF) rate and the Bank Rate stay at 9.5 per cent.
The RBI also decided to keep the cash reserve ratio (CRR) of scheduled banks unchanged at 4.75 per cent.
The central bank had cut CRR by 75 basis points from 5.5 per cent to 4.75 per cent on 10 March to ease the liquidity crunch in the system. The RBI had earlier cut CRR by 50 basis points in end-January. Taken together, these measures have freed about Rs80,000 crore of bank funds parked with the RBI without earning any interest.
In its guidance, RBI said recent growth-inflation dynamics have prompted it to indicate that no further tightening is required and that future actions will be towards lowering the rates.
However, notwithstanding the deceleration in growth, inflation risks remain, which will influence both the timing and magnitude of future rate actions, the RBI's review statement said.
Analysts said that with the union budget due to be announced on Friday, the RBI was probably holding its cards close to its chest for now.
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