RBI Chief Raghuram Rajan keeps interest rate unchanged

Mumbai: Giving no respite to borrowers, the Reserve Bank for the third time in a row kept the key policy rate unchanged, saying that it has to remain vigilant to the impact of deficient monsoon on the price situation.

RBI Governor Raghuram Rajan, however, lowered the Statutory Liquidity Ratio, the portion of deposits that banks are required to keep in government bonds, by 0.5 per cent to unlock about Rs 40,000 crore into the system.

The Finance Ministry suggested that going forward, the RBI should examine the liquidity situation, inflation and growth while fixing the policy rate. “The Governor, RBI has already stated that RBI will not hold interest rates high any longer than is necessary and if disinflation proceeds as warranted, there will eventually be room to cut rates,” the statement said.

Bankers said the RBI status quo does not provide room to cut interest rate and hence the EMIs for home and auto loans will remain the same. Industry chambers voiced disappointment saying the RBI should have cut the rate to boost growth.

Mr Rajan said there are upside risks to inflation in view of uncertain monsoon and its impact on food production as also volatile international oil prices.