India's central bank kept its key lending rates unchanged during its monetary policy review on Tuesday, sticking to its stand that further cuts will depend on commercial banks passing on the previous reductions to borrowers, among other factors.
Reserve Bank of India Governor Raghuram Rajan chose to maintain both the repo rate, or the short-term lending rate, and the cash reserve ratio, or the liquid money banks have to compulsorily hold, at 7.25 percent and and 4.0 percent, respectively.
Accordingly, the reverse repurchase rate, or the central bank's borrowing rate, has also been left unchanged at 6.25 percent.
Speaking about the current situation pertaining to growth and inflation, among other issues, Rajan said: "Taking into account all this, and 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."
>> Key policy rate (repo) kept unchanged at 7.2 per cent;
>> Cash reserve ratio (CRR) unchanged at 4 per cent;
>> Economic recovery is still work in progress;
>> After strong rainfall in June, July has been below par, but overall monsoon is near normal;
>> Most worrisome is sustained hardening of inflation except food and fuel;
>> Signs that consumption demand, especially in urban areas, is picking up;
>> Weak global demand conditions restrained exports;
>> Banks have passed on an average 0.3 per cent interest rate cut as against RBI's 0.75 per cent rate cut since January;
>> New investment demand emanating from private sector and government remains subdued;
>> RBI retains growth target at 7.6 per cent for 2015-16;
>> Capital infusion into PSBs will help loan growth and transmission;
>> Fourth bi-monthly monetary policy to be announced on September 29.