RBI keeps key rates unchanged; to assess the impact of unseasonal rains

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By Newsgram Staff Writer

The Reserve Bank of India decided to keep the policy repo rate at 7.5 per cent in its monetary policy statement, and the cash reserve ratio (CRR) of scheduled banks at 4.0 per cent on Tuesday.

The RBI governor Raghuram Rajan kept the policy rate unchanged until the impact of unseasonal rains on food inflation is decided.  He also wanted banks to pass on benefits of previous two rate cut .

“Transmission of policy rates to lending rates has not taken place so far despite weak credit off take and the front loading of two rate cuts. With little transmission, and the possibility that incoming data will provide more clarity on the balance of risks on inflation, the Reserve Bank will maintain status quo in its monetary policy stance in this review,” said the governor.

The decision of doing so has been taken cause of the fears of spike in food prices as the unseasonal rains and hailstorm have impacted rabi crops across North and Western India.

The authorities from RBI stated that, “The RBI will await the transmission by banks of its front-loaded rate reductions in January and February into their lending rates. Transmission of policy rates to lending rates has not taken place so far despite weak credit off take and the front loading of two rate cuts.”