Belying expectations, Reserve Bank of India today kept its key short-term lending rate, or repo rate, unchanged at 6.25 percent. The Reserve Bank's 6-member Monetary Policy Committee unanimously decided to maintain status quo. <br/><br/>The Reverse repo rate, the Marginal Standing Facility, and the Bank Rate were also kept unchanged. <br/><br/>In its monetary policy review, the central bank also lowered its GDP growth forecast to 7.1 per cent for this fiscal, from the earlier 7.6 percent, due to short-term disruption in economic activities from demonetisation. <br/><br/>Headline inflation is projected at 5 per cent by the fourth quarter of 2016-17, with risks tilted to the upside, but lower than in the October policy review. The RBI said the impact of demonetisation should ebb with the progressive increase in the circulation of new currency notes and greater usage of non-cash based payment instruments in the economy.<br/><br/>The Reserve Bank also withdraw the 100 per cent incremental Cash Reserve Ratio from December 10. The move will allow banks to retain the deposits coming to them due to demonetisation. <br/><br/><br/>RBI Governor Urjit Patel clarified that the decision to demonetise old 500 and 1000 rupee notes was not taken in haste but after detailed deliberations. Addressing a press conference post the announcement of 5th Bi-monthly Monetary Policy Review, Mr. Patel said the motivation behind this move was to check the menace of high quality counterfeit currency notes and to unearth black money that was stored in cash. <br/><br/>While maintaining that a high level of secrecy had to be maintained to ensure that the motive was not jeopardised, Mr. Patel said that RBI is fully conscious of the difficulties that people are facing and is constantly working to mitigate the troubles.<br/><br/>On a the brighter side, Mr. Patel said that new notes with enhanced security features will not only bring more transparency and accountability into the system but will also be very difficult to forge. He added that a collateral benefit of demonetisation is the increased use of digital payment systems; which in the long term will cut the cost of printing currency notes as the total quantum of paper currency will come down. <br/><br/>Stating that there is no fundamental trust deficit on demonetisation, Mr. Patel said public at large has approved the policy as a counter measure for unearthing black money. <br/><br/>RBI Governor also thanked the employees of all public and private sector banks for their dedicated work while also acknowledging the unstinting effort of RBI staff and printing presses.<br/><br/>Chief Economic Advisor Arvind Subramanian has termed the RBI decision to keep monetary policy rate unchanged as bold and brilliant. <br/><br/>Talking to reporters in New Delhi today, Mr Subramanian said, there is uncertainty, both in domestic and International market and the RBI's decision will stablise the market. <br/><br/>He said, Internationally interest rates have gone up considerably after the US election and in India interest rate is coming down because of liquidity going into the Banking system.

In its mid-quarter review of monetary policy, today, the Reserve Bank of India has kept its key policy interest rates unchanged. The apex bank kept its short-term lending rate steady at 6.25 per cent, and its borrowing rate unchanged at 5.25 per cent. The RBI also maintained the Cash Reverse Ratio at 6 per cent. However, it decided to reduce the Statutory Liquidity Ratio, the portion of deposits that banks park in government securities, by one percentage point, to 24 per cent, from this Saturday. It also decided to buy government securities from banks to the tune of 48,000 crore rupees in the next one month to inject more funds into the system.The RBI policy position is in line with the Prime Minister's Economic Advisory Council's observation that the system was feeling the pinch of liquidity shortage. It also coincides with inflation coming down to below 8 per cent from double digits till recently.