The Reserve Bank of India on Wednesday decided to keep interest rates unchanged, as expected by a majority of economists. Thus, the repo rate remains at 6% and the reverse repo rate at 5.75%. The repo rate is the rate at which the RBI provides funds to banks.
After its monetary policy meet, the central bank said that the decision to keep rates unchanged was made with the objective to keep consumer price index inflation in check. India’s consumer price inflation rose to 3.58% in October, the highest in seven months, data released by the Central Statistics Office on November 13 showed. The consumer price index reflects the change in prices of goods bought and sold on the retail market.
In its statement on Wednesday, the central bank said that it had decided to maintain the economic growth projection for the 2017-’18 financial year at 6.7%, despite the GDP growth rate for the second quarter being lower than expected. “The projection of real Gross Value Added growth at 6.7% during the October resolution has been retained,” the RBI said. Gross Value Added is the rupee value for the amount of goods and services produced in an economy after deducting the cost of inputs and raw materials.
RBI Governor Urjit Patel said the bank recapitalisation plan that the government recently announced was a “reform package” that would help economic growth pick up. RBI Deputy Governor Viral Acharya said the liquidity surplus in the economy had reached a peak of Rs 7.96 lakh crore at the beginning of the year, and had now reduced.
At its last policy meet in October, the RBI had kept the rates unchanged while it had cut its benchmark policy rates by 25 basis points to 6% from 6.25% in August. One basis point is one-hundredth of a percentage point.
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