RBI keeps key rates unchanged as inflation persists

July 31st, 2012 - 1:56 pm ICT by IANS  

Mumbai, July 31 (IANS) The Reserve Bank of India (RBI) Tuesday kept key policy rates unchanged for the second time since June, saying lowering of rates would aggravate inflationary pressure.

In the first quarter review of the monetary policy, the central bank kept repo rate, the rate at which the RBI lends to commercial banks, unchanged at 8 percent. The reverse repo rate, the rate at which the RBI borrows money from commercial bank, remains unchanged at 7 percent.

Cash Reserve Ratio (CRR), the amount of funds that the commercial banks have to keep with the RBI, stands steady at 4.75 percent.

These rates determine the lending and borrowing rates by the commercial banks to general public and corporates.

“In the current circumstances, lowering policy rates will only aggravate inflationary impulses without necessarily stimulating growth,” the RBI said in the monetary policy review.

However, the central bank cut the statutory liquidity ratio by a percentage point to 23 percent to increase the flow of credit to industry.

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