RBI Keeps Interest Rates On Hold, CRR Too Unchanged

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The Reserve Bank of India (RBI) as was largely expected held interest rates steady in its policy meeting and did not oblige on a CRR cut either. The repo rate or the interest rate at which the central bank lends money to banks, was kept unchanged at 6.25 per cent by the Monetary Policy Committee (MPC) of the RBI. The rates have remained unchanged since October 2016.

RBI Keeps Interest Rates On Hold, CRR Too Unchanged
While retail inflation has dropped to a low in April 2017 and the GDP growth had shown a sharp downturn in the fourth quarter of 2016-17, the central bank did not oblige with a rate cut. The country's central bank would also be mindful of the impact the implementation of Goods and Services Tax (GST), would have on inflation.

Since October 2016, there have been three policy reviews, but the central bank has kept its policy rate steady. In today's review the RBI noted that fiscal slippages could lead to inflationary threats, while GST was not a worry for inflation.

"The risk of fiscal slippages, which, by and large, can entail inflationary spillovers, has risen with the announcements of large farm loan waivers. At the current juncture, global political and financial risks materialising into imported inflation and the disbursement of allowances under the 7th central pay commission's award are upside risks. The date of implementationof the latter is still not announced and as such, it is not factored into the baseline projections. The implementation of the GST is not expected to have a material impact inflation," a release from the RBI stated.

Five members were in favour of the monetary policy decision, while Dr. Ravindra H.
Dholakia was not in favour. The minutes of the MPC's meeting will be published by June 21, 2017. The next meeting of the MPC is scheduled on August 1 and 2, 2017.

Read more about: rbi, banking, interest rates
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