RBI maintains status quo on key interest rates

RBI Governor Raghuram Rajan said the government was in the process of determining the base rate and it will be announced later this week' The Dollar Business Bureau

RBI is set to bring down inflation to 6% by January next year and aims to further reduce it to 5% by March 2017

The Reserve Bank of India (RBI) on Monday decided to keep key interest rates unchanged in the backdrop of current and evolving macroeconomic situation. Following the announcement, the CRR (cash reserve ratio) remains unchanged at 4% while the repo rate remains unaltered at 6.75%. “The reverse repo rate under the LAF will remain unchanged at 5.75%, and the marginal standing facility (MSF) rate and the bank rate at 7.75%,” RBI said in a statement. Announcing the fifth bi-monthly monetary policy of the current financial year on Tuesday, RBI Governor Raghuram Rajan said, “The implementation of the pay commission proposals and its effects on wages and rent will also be a factor when we consider policy in the future.” Rajan, however, said the government was in the process of determining the base rate and it will be announced this week. “We are working with banks on a new methodology to determine the base rate; it will be based on marginal cost and it should be put out sometime this week,” Rajan said. State-owned banks in India have a non-performing loan problem as they are worried about corporate defaults and are wary of lending. RBI is set to bring down inflation to 6% by January next year and aims to further reduce it to 5% by March 2017. “Banks are currently engaged in the process of cleaning up their balance sheets and as they clean them up, they will have more rooms for lending. We will use the space for further accommodation when available while keeping the economy anchored to the projected disinflation path that should take the inflation down to 5% by 2017,” Rajan said.

December 01, 2015 | 4:15pm IST

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The Dollar Business Bureau - Dec 01, 2015 11:00 IST

RBI maintains status quo on key interest rates

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