RBI keeps rates unchanged, unlocks Rs 40,000 cr of bank funds

Tags: RBI, SLR, News
Committed to keep inflation under check, RBI governor Raghuram Rajan today left key rates unchanged and unlocked about Rs 40,000 crore of funds by reducing the amount of deposits banks are required to park in government securities.

This is the second time in a row that interest rates have been left unchanged amid demands for moderation to spur growth.

The repo rate, at which the Reserve Bank of India lends to banks, has been retained at 8 per cent, while the statutory liquidity ratio (SLR) for banks has been cut by 0.5 per cent to 22.5 per cent with effect from June 14.

The cash reserve ratio for banks has been kept unchanged at 4 per cent.

"At this juncture, it is appropriate to leave the policy rate unchanged, and to allow the disinflationary effects of rate increases undertaken during September 2013-January 2014 to mitigate inflationary pressures in the economy," Rajan said while unveiling the Second Bi-Monthly Monetary Policy Statement for 2014-15.

Consumer price index (CPI) inflation, excluding food and fuel, has moderated gradually since September 2013 although it is still elevated, he said.

Rajan, who has increased the repo rate thrice since September, said no more tightening would be warranted if the economy stays on a disinflationary course. He added that the RBI may also consider a cut if the disinflation process is faster than anticipated.

Rajan reiterated the RBI's commitment to its target of getting CPI inflation, which accelerated to 8.59 per cent in April, down to 8 per cent by January 2015 and 6 per cent by the year after.

On growth, Rajan maintained the RBI's median estimate of GDP expansion coming in at 5.5 per cent for this financial year.

Post new comment

E-mail ID will not be published
CAPTCHA
This question is for testing whether you are a human visitor and to prevent automated spam submissions.

EDITORIAL OF THE DAY

  • The current value of the rupee does not merit market intervention

    The rupee, losing 40 paise per month against the dollar since May, is expected to remain under pressure till the calendar runs out on December 31, bef

FC NEWSLETTER

Stay informed on our latest news!

INTERVIEWS

GV Nageswara Rao

MD & CEO, IDBI Federal Life

Timothy Moe

Goldman Sachs

Chander Mohan Sethi

CMD, Reckitt Benckiser India

COLUMNIST

Tushar Gandhi

Sustainable model for rural sanitation

Prime minister Narendra Modi has promised to build a toilet ...

Zehra Naqvi

How smells evoke strong memories

Remember that time when a passing fragrance transported you to ...

Dharmendra Khandal

Indian zoos need a fresh approach

Recently, when a man jumped in a tiger trench of ...

INTERVIEWS

William D. Green

Chairman & CEO, Accenture