5 reasons the RBI did not cut interest rates

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The Reserve Bank of India today left key interest rates unchanged, ensuring that interest rates on loans and deposits remain steady. This means interest rates in auto loans, home loans and personal loans are not going to go up in a hurry. Here are a few reasons the country's central bank may have decided to keep interest rates on hold.

5 reasons the RBI did not cut interest rates

RBI has always given importance to inflation over growth. With the rupee falling to a record 58.97 against the dollar last week, the fear remains that high crude oil imports costs, would push up domestic petrol and diesel prices. Seen in the pic is RBI Governor D Subbarao at the PTI Office earlier this month.

5 reasons the RBI did not cut interest rates

Higher diesel and petrol costs due to imported crude oil would push the costs of transportation and hence most of the products transported from retail to vegetables and grocery. RBI cannot cut rates when inflation is likely to rise.  

5 reasons the RBI did not cut interest rates

The current account deficit hit a record high of 6.7 percent in the October-December quarter, which continues to weigh on the rupee.

5 reasons the RBI did not cut interest rates

Though WPI inflation has come down, the CPI inflation continues to remain at elevated levels. This is way above the RBI's comfort zone, which may have prompted it to hold interest rates.

5 reasons the RBI did not cut interest rates

The RBI perhaps may have wanted the government to do more to stem the slide of the rupee and also on the current account deficit, which will certainly reduce inflation.

Read more about: rbi, repo rates
Story first published: Monday, June 17, 2013, 10:35 [IST]
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