In line with market expectations, the Reserve Bank of India today maintained the status quo with regard to the key interest rates in its third bi-monthly monetary policy review for 2014-15. In its monetary policy statement released in Mumbai, RBI stated that on the basis of an assessment of the current and evolving macroeconomic situation, it has been decided to keep the policy repo rate, the rate at which the RBI lends money to commercial banks, unchanged at 8 per cent. The reverse repo rate, the rate at which the RBI borrows money from commercial banks, will also remain unchanged at 7 per cent. The cash reserve ratio (CRR) of scheduled banks, the amount of funds that the banks have to keep with the RBI, has been kept unchanged at 4 per cent. RBI has, however, reduced the statutory liquidity ratio (SLR) of scheduled commercial banks by 50 basis points from 22.5 per cent to 22.0 per cent with effect from the fortnight beginning 9th August, 2014. The RBI has also stated that prospects for reinvigoration of growth have improved modestly. It has said that if the recent pick-up in industrial activity is sustained, the central estimate of real GDP growth of 5.5 per cent within a likely range of 5 to 6 per cent that was set out in the April projection for 2014-15 can be sustained. Regarding the inflation, RBI has stated that the upside risks to the target of ensuring CPI inflation at or below 8 per cent by January 2015 remain, although overall risks are more balanced than in June. The fourth bi-monthly monetary policy statement is scheduled on 30th September, 2014.
The industry bodies have welcomed Reserved bank's decision to keep interest rates unchanged saying it will help increase the over all economic activity in the country.
Director General of Federation of Indian Chambers of Commerce and Industry, FICCI's Arvind Prasad said that in the given economic scenario, RBI has taken right step. He said the the industry expects RBI to take major steps in future to bring down the interest rates that will give support to manufacturing sector and consumer markets.
The chief economist of PHD Chamber of Commerce and Industry S P Sharma endorsed the RBI move to decrease SLR by 0.5 per-cent and said that it will help the banking sector to strengthen the credit flow to the needed sector of the economy.
Dr. Shubhada Rao Senior President and Chief Economist of Yes Bank said that RBI move will help curb the inflation and it will give an opportunity to RBI to cuts rates next year.