The Reserve Bank of India (RBI) kept interest rates unchanged on Wednesday, in a decision that was widely expected as inflation has eased significantly, while it took steps to persuade banks to lend more in order to support an economy that has lost some momentum.
FILE PHOTO - The Reserve Bank of India (RBI) seal is pictured on a gate outside the RBI headquarters in Mumbai October 29, 2013. REUTERS/Danish Siddiqui/File Photo
“The time is apposite to further strengthen domestic macro-economic fundamentals,” the central said in a statement following a monetary policy committee (MPC) meeting.
The decision to keep the repo rate unchanged at 6.50 percent was as predicted by 64 of 70 analysts in a Reuters poll. The central bank also retained its ‘calibrated tightening’ stance as expected.
All six members of the MPC voted to keep the rates on hold.
“Even as inflation projections have been revised downwards significantly and some of the risks pointed out in the last resolution have been mitigated, especially of crude oil prices, several uncertainties still cloud the inflation outlook,” the bank said in its statement.
The central bank said starting in the January-March quarter of 2019 it would begin to lower banks’ mandatory bond holding ratios, by 25 basis points each quarter until it reaches 18 percent of deposits.
The so-called statutory liquidity ratio (SLR) currently stands at 19.50 percent and the move to lower the SLR should prod banks to lend more rather than park their cash in safe-haven government securities.
India’s 10-year benchmark bond yield was trading at 7.46 percent from 7.54 percent before the policy statement.
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