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RBI Keeps Key Rates Unchanged
Dec 04, 2014

Reserve Bank of India (RBI) kept lending rates unchanged despite plunging inflation and mounting pressure to ease borrowing costs to aid a revival. The benchmark lending rate has remained unchanged since January 2013, demonstrating the RBI governor’s unwavering commitment to keep inflation firmly checked for longer period of time, before softening of the rather hawkish stance.

RBI retained the Repo Rate—the rate at which banks borrow from RBI—at 8 percent and kept the Cash Reserve Ratio (CRR)—the proportion of deposits banks to have to park with the central bank—at 4 percent, in the bi-monthly monetary policy review.

Retail inflation eased in to a three-year low of 5.52 percent in October, below the central bank's target of 6 percent by 2016. India’s wholesale inflation rate—the main gauge to capture country-wide price movements—has also plunged to a five-year low of 1.77 percent in October.

The next monetary policy is scheduled for February 3, 2015, but RBI did not rule out a rate revision outside of the policy calendar depending on future price movements.

Unchanged interest rates would imply home loan EMIs, which eat away large chunks of household incomes, are unlikely to fall anytime soon. High loan rates could influence people’s decision to buy houses, cars and other consumer goods, mostly bought through loans.


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