No change in interest rates; RBI holds repo rates steady in Credit Policy

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No change in interest rates; RBI holds repo rates steady in Credit Policy
The Reserve Bank of India (RBI) today kept repo rates on hold as was largely expected from the country's central bank. Repo rates are rates at which the RBI lends money to banks.

This means that interest rates in the economy may not go up in a hurry and interest rate on loans, including personal, home loan, car loan, education loan and gold loan would rule steady.

The RBI marginally cut the HTM ceiling to 24% and kept the CRR unchanged. The central bank has reduced the statutory liquidity ratio (SLR) of scheduled commercial banks by 50 basis points from 22.5 per cent to 22.0 per cent of their NDTL with effect from the fortnight beginning August 9, 2014. 

Worries on inflation remains

The RBI has said that the retail inflation measured by the consumer price index (CPI) has eased for the second consecutive month in June, with a broad-based moderation accompanied by deceleration in momentum.

"Higher prices of vegetables, fruits and protein-based food items were offset by the muted increase in the prices of non-food items, particularly those of household requisites and transport and communication. CPI inflation excluding food and fuel decelerated further, extending the decline that began in September 2013.

However, with some continuing uncertainty about the path of the monsoon, it would be premature to conclude that future food inflation, and its spill-over to broader inflation, can be discounted," the RBI has said.

Prospect for growth have improved

Prospects for reinvigoration of growth have improved modestly, the country's central bank has stated. "The firming up of export growth should support manufacturing and service sector activity.

If the recent pick-up in industrial activity is sustained in an environment conducive to the revival of investment and unlocking of stalled projects, with ongoing fiscal consolidation releasing resources for private enterprise, external demand picking up and international crude prices stabilising, the central estimate of real GDP growth of 5.5 per cent within a likely range of 5 to 6 per cent that was set out in the April projection for 2014-15 can be sustained," the RBI has said in its release.

Story first published: Tuesday, August 5, 2014, 10:28 [IST]
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