Home, auto EMIs to remain intact, as RBI retains interest rates

Equated monthly installments EMIs paid on home automobile and other loans would remain unchanged as the Reserve Bank of India RBI left key interest rates unchanged in its third bimonthly monetary policy review TuesdayThe status quo in key policy rates would mean that the sectors like realty automobile and other capital intensive industries will not get any relief from the high interest cost prevailing in the country to contain inflationSeveral sectors like automobiles have been struggling to keep up sales due to high interest and fuel costs which has dampened consumer sentiments in Asias third largest economyGovernor Raghuram Rajan said in his policy statement that RBI will continue to closely monitor inflation developments and remains committed to the disinflationary path of taking Consumer Price Index CPI inflation to 8 percent by January 2015 and 6 percent by January 2016While inflation at around 8 per cent in early 2015 seems likely it is critical that the disinflationary process is sustained over the mediumterm the governor saidThe repo rate or the interest that banks pay when they borrow money from the RBI to meet their shortterm fund requirements has been left unchanged at 8 percentThe reverse repo rate or the interest that the RBI pays to commercial banks when they park their surplus shortterm funds with the central bank has been adjusted to 7 percentThe Cash Reserve Ratio CRR is left unchanged at 4 percent The marginal standing facility rate and the Bank Rate is also kept unchanged at 9 percentThe statutory liquidity ratio SLR the mandatory amount of bonds lenders must keep with the RBI was cut by 05 percent to 220 percent of their net demand and time liabilities NDTL with effect from August 9 2014The central banks action is on the expected lines as most analysts predicted a status quo considering the macroeconomic situation and current dataThere are upside risks in the form of the passthrough of administered price increases continuing uncertainty over monsoon conditions and their impact on food production possibly higher oil prices stemming from geopolitical concerns and exchange rate movement and strengthening growth in the face of continuing supply constraint the policy statement saidData released earlier by the Central Statistics Office CSO showed that retail inflation based on Consumer Price Index CPI declined to 731 percent in June from 828 percent in the previous monthThe central and state governments are taking steps to contain the rising food prices by either directly selling edible commodities or easing grain importsThe price of tomatoes has skyrocketed in certain areas to nearly Rs80100 a kgMeanwhile India Inc welcomed the RBI move to put more funds into the system by cutting SLR However it said that an interest rate cut should also be considered when inflation is slowing down and growth needs a boostAt a time when industrial growth continues to be sluggish Consumer Price Index CPI based inflation is moderating and above all inflation risks are gradually abating due to improvement in monsoon conditions the RBI could have taken this opportunity to effect a cut in interest rates said Chandrajit Banerjee director general Confederation of Indian Industry CIIThe Federation of Indian Chambers of Commerce and Industry FICCI said the statement by the RBI reaffirms that the economy is on the mendOn the inflation front the industry lobby said steps taken by the central government to manage food inflation should be followed up with close coordination with the states to ensure that their mitigating impact is seen at the earliestHowever Associated Chambers of Commerce and Industry of India Assocham said retention lending rates may not help revive growth to the extent of its potential of six percent in the current fiscalRBI has once again taken an overcautious approach and easing of the same could have taken the GDP growth in the near about of six per cent in the current fiscal itself said Rana Kapoor president AssochamThe markets too welcomed the apex banks move of leaving the key interest rates unchangedThe 30scrip Sensitive Index Sensex of the SampP Bombay Stock Exchange BSE which opened at 2581784 points closed trade at 2590801 points up 18485 points or 072 percent from the previous days close at 2572316 pointsThe wider 50scrip Nifty of the National Stock Exchange NSE closed the trade 6290 points or 082 percent up at 774655 points