RBI kept interest rates CRR unchanged in monetary policy review today

The Reserve Bank of India has kept the key interest rates unchanged today during its monetary policy review due to rising food inflation, rupee depreciation and uncertainty over foreign fund inflows. The repo rate has been kept unchanged at 7.25% while reverse repo rate kept unchanged at 6.25% while the cash reserve ratio retained at 4%. SLR and bank rates have been kept unchanged at 23% and 8.25% respectively. The RBI had reduced key policy rate (repo rate) by 0.75% during the last three monetary policy announcements.

The main reasons behind this decision are rising food inflation, depreciated rupee and rising current account deficit. Though the headline inflation has come down significantly, food inflation is still at near double digit level. Indian Rupee has declined by 5.8% January 1 and touched a record low of 58.96 to a dollar last week. Depreciating rupee and rising Current account deficit are the biggest concerns for RBI now.

From economy point of view, RBI has said that global economic activity has slowed and risks remain elevated. On the domestic front, macroeconomic conditions remain weak, hurt by infrastructure bottlenecks, supply constraints, lackluster domestic demand and subdued investment sentiment. RBI has projected the GDP growth for 2013-14 at 5.7% compared to previous year GDP growth of 5%.