Share on Facebook0Share on Google+0
Pin on Pinterest0Tweet about this on TwitterShare on LinkedIn0

Reserve Bank of India governor, Raghuram Rajan today left the key policy interest rate, or repo rate unchanged, at 6.75 percent. In its bi-monthly monetary policy review, the RBI also kept the Cash Reserve Ratio unchanged, at 4 percent. The RBI governor said that uptick in retail inflation, excluding food and fuel, for two months in succession warrants vigilance. Rajan said, the Reserve Bank will use the space for further accommodation, when available, while keeping the economy anchored to the projected disinflation path that should take inflation down to 5 per cent by March 2017. On growth, the RBI governor said robust second quarter GDP numbers suggest that the economy is in early stages of recovery. But he retained the RBI’s earlier projection of 7.4 per cent growth for the current fiscal. Rajan also expressed anguish at the reluctance of banks to pass on the benefits of the earlier rate cut actions to borrowers. He noted that the median decrease in the base rates over the course of the year has only been 0.6 per cent, compared to the RBI’s 1.25 per cent cut in the repo rate since January. Governor Raghuram Rajan also said the RBI will, this week, issue guidelines to determine base rates on a new methodology based on the marginal cost of funds. The RBI governor said the Seventh Pay Commission recommendations will not upset fiscal maths as additional expenditures will be offset by either surplus revenues or expenditure cuts.