RBI keeps policy rate unchanged in fear of food inflation

Mumbai: Reserve Bank Governor Raghuram Rajan on Tuesday kept policy rate unchanged awaiting clarity on impact of unseasonal rains on food inflation even as he wanted banks to pass on benefits of previous two rate cuts.

The repo rate, at which RBI lends to the banking system, will continue to be at 7.5 percent and the cash reserve ratio, which is the amount of deposits parked with the central bank, will remain at 4 percent.

“Transmission of policy rates to lending rates has not taken place so far despite weak credit off take and front loading of two rate cuts. With little transmission, and the possibility that incoming data will provide more clarity on the balance of risks on inflation, the Reserve Bank will maintain status quo,” he said in the first bi-monthly policy review for 2015-16.