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RBI holds key interest rates steady
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SME Times News Bureau | 01 Dec, 2015
The central bank on Tuesday kept its short-term lending and
borrowing rates unchanged, in line with expectations, balancing its
policy action between a comforting, 7.4 percent economic growth for the
second quarter of this fiscal and a creeping inflation.
In its
fifth bi-monthly monetary policy review of the current fiscal conducted
by Reserve Bank of India Governor Raghuram Rajan here, the repurchase
rate at which short-term credit is extended to commercial banks was left
unchanged at 6.75 percent.
Accordingly, the reverse repurchase
rate, or the interest paid by the central bank for short-term
borrowings, also stood frozen at 5.75. percent. The statutory liquidity
ratio and cash reserve ratio that banks have to keep in liquid assets
and government securities also remained intact.
The Reserve Bank
of India also kept its overall growth projection for 2015-16 at 7.4
percent and said the inflation target of 6 percent in January next year
as set out in the previous policy update also was within reach, albeit
with a slight downside risk.
Soon after the monetary policy
update, the sensitive index (Sensex) of the Bomay Stock Exchange and the
Nifty of the National Stock Exchange (NSE) took a slight dip, but
stabilised thereafter, as investors felt the pronouncements were on
expected lines.
Rajan, who expressed concern over farm growth and
retail inflation, remained neutral on services sector and saw some ray
of hope with a pick up in factory output growth, said: "We're seeing an
economy that is well and truly in recovery, but with areas of concern."
The governor also sought once again to nudge the commercial banks to cut interest rates.
He
said since January, when the RBI started cutting its lending rates and
easing its monetary policy stance, less than half of the cumulative
policy repo rate reduction of 125 basis points has been passed on by
commercial banks.
"The median base lending rate has declined only
by 60 basis points," Rajan said. "The government is examining linking
small savings interest rates to market interest rates. These moves
should further help transmission of policy rates into lending rates," he
added.
At the same time, Rajan alluded that there was no plan to tighten the policy stance.
"We're
still accommodative and that is clear. We're also vigilant," Rajan told
a press conference soon after unveiling the policy update when asked if
there was a change of stance in the RBI's outlook.
"The Reserve
Bank will use the space for further accommodation, when available,
while keeping the economy anchored to the projected disinflation path
that should take inflation down to 5 per cent by March 2017."
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Customs Exchange Rates |
Currency |
Import |
Export |
US Dollar
|
66.20
|
64.50 |
UK Pound
|
87.50
|
84.65 |
Euro
|
78.25
|
75.65 |
Japanese
Yen |
58.85 |
56.85 |
As on 13 Aug, 2022 |
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