RBI keeps interest rates unchanged as inflation worry lingers

Tuesday, Sep 30, 2014,19:34 IST By metro vaartha A A A

For the fourth time in a row, RBI kept key interest rates unchanged today maintaining that it will not cut them unless inflation moderates to anticipated levels, disappointing borrowers and the industry in this festive season.
Reserve Bank Governor Raghuram Rajan hoped that inflation will moderate to acceptable level of 6 per cent by January 2016 and maintained that the GDP growth in the current fiscal will be 5.5 per cent, same as projected earlier.
While the unchanged policy will not result in any relief to borrowers in the festive season, RBI relaxed the ‘know your customer’ norms by allowing self-certification of documents needed for opening bank accounts.
The central bank is also in the process of modifying the definition of wilful defaulters so as to bring the directors of defaulting companies within its ambit and announced setting up of a Central Fraud Registry to check frauds.
The short-term lending rate (repo) rate will remain at 8 per cent, and the cash reserve requirement of banks at 4 per cent. The statutory liquidity ratio (SLR) has also been retained at 22 per cent.
In the bi-monthly monetary policy review, Rajan said: The future policy stance will be influenced by the RBI’s projections of inflation relative to the medium term objective of 6 per cent by January 2016, while being contingent on incoming data.
Commenting on the RBI policy, Financial Services Secretary G S Sandhu said the central bank understands the needs of market and would cut interest rate at the right time.
RBI is fully understanding the issue. It fully understands needs and expectation of markets, so they will take a view (on cutting policy rates) when the time is right, he said.
Industry said however that RBI has missed an opportunity to cut interest rate at a time when the WPI inflation has fallen to a 5 year low of 3.74 per cent and oil prices have softened to USD 94 per barrel.

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