RBI keeps key interest rates unchanged at 7.75 pc

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SME Times News Bureau | 03 Feb, 2015
The Reserve Bank of India (RBI) Tuesday decided to keep key interest rates unchanged in its sixth bi-monthly policy review.

The apex bank kept the repo rate, or the interest that banks pay when they borrow money from the RBI to meet their short-term fund requirements, unchanged at 7.75 percent.

The reverse repo rate, or the interest that the RBI pays to commercial banks when they park their surplus short-term funds with the central bank, has been adjusted to 6.75 percent.

On Jan 15, the apex bank had cut the the repo rate by 25 basis point from 8 percent to 7.75 percent.

On Tuesday, the RBI reduced the statutory liquidity ratio (SLR), the mandatory amount of bonds lenders must keep with it by 50 basis points to 21.5 percent of their net demand and time liabilities (NDTL).

President of PHD Chamber of Commerce and Industry, Alok B. Shriram said, "50 basis points cut in SLR is welcome and is expected to enhance banking sector liquidity in the coming times."

Recent developments at the macro-economic front are inspiring vis-à-vis various policy initiatives undertaken by the new Government. However, industrial growth must be focused as industry is impacted by multiple factors and high borrowing cost is one of them, he added.

We appreciate and congratulate the Government and RBI on various calibrated steps to stabilize the price situation in the economy, which is expected to improve the livelihood of common man, said Shriram.

However, going ahead, there is a need to rejuvenate the demand scenario in the economy to boost up manufacturing growth and to create more and more employment opportunities. So at this juncture, lower interest rates and lower cost of borrowings for the industry would be inevitable, believes Shriram.

Going ahead, we expect a repo rate cut by atleast 50 basis points on or before first bi-monthly monetary policy statement for 2015-16 due on April 7, 2015, said Shriram.

The Cash Reserve Ratio (CRR) is left unchanged at 4 percent.

The central bank's action is on expected lines as most analysts had predicted a status quo, considering the apex bank had last month cut the repo rate.