"Finance world of India" No rate hike, RBI eyes inflation for cues

With inflation remaining high, the Reserve Bank of India today kept the interest rate unchanged for now, but made a promise that cost of borrowing will come down in future. Amidst expectations of a pause in tight monetary policy, RBI Governor D Subbarao gave a firm signal that no further hardening of interest rates is required.

However, the timing and the quantum of rate cuts will be determined by inflation, he said unveiling the mid-quarterly review of the credit policy, a day before the Union Budget. The benchmark policy interest rate (repo rate) at which RBI lends to banks has been kept unchanged at 8.5 per cent. The cash reserve ratio, the portion of deposits banks need to keep with RBI, has been retained at 4.75 per cent. But this rate was reduced only on March 10 by 0.75 percentage points to infuse Rs 48,000 crore in the system to ease liquidity.