RBI Keeps Repo Rate Unchanged, Slashes SLR By 50 bps

The Reserve Bank of India (RBI), in its third bi-monthly monetary policy statement for FY2014-15, kept the repo rate unchanged at 8%. The reverse repo rate, too, remained the same at 7%.

The statutory liquidity ratio (SLR) was slashed by 50 bps to 22%. "The moderation in CPI headline inflation for two consecutive months, despite the seasonal firming up of prices of fruits and vegetables since March, is due to both base effects and the steady deceleration in CPI inflation excluding food and fuel," RBI Governor Raghuram Rajan said.

"The recent fall in international crude prices, the benign outlook on global non-oil commodity prices and still-subdued corporate pricing power should all support continued disinflation, as should measures undertaken to improve food management. There are, however, upside risks also, in the form of the pass-through of administered price increases, continuing uncertainty over monsoon conditions and their impact on food production, possibly higher oil prices stemming from geo-political concerns and exchange rate movement, and strengthening growth in the face of continuing supply constraints," the RBI said.

The central bank said it would continue to monitor inflation and it remained committed to bring CPI inflation to 8% by January 2015 and 6% by January 2016.

“The Reserve Bank has taken a number of steps to enhance efficiency, increase entry, speed up resolution, and improve access to financial services, such as modified regulations on long term lending and borrowing, proposals for licensing payment banks and small banks, a framework to deal with stressed assets, actions to further the use of mobile phones in banking, and efforts to simplify know your customer (KYC) norms, among others,” the bank said in its press release.