In its mid-quarter review of monetary policy today, RBI has kept its key policy rates unchanged in the light of significantly worsened global economic outlook.
Finally, the country’s apex banker has decided to remain status quo in terms of interest rates under the liquidity adjustment facility. While the cash reserve ratio (CRR) remains unchanged at 6%, repo rate and reverse repo rates were untouched at 8.5% and 7.5% respectively.
Repo rate is the rate at which commercial banks borrow money from the RBI. An up tick in the repo rate translates in to higher borrowing costs for the Indian banks. On the other hand, higher reverse repo rates imply RBI’s willingness to borrow money at lucrative rate of interest, to suck in excess liquidity from the system.
In its note, RBI said that though inflation still remains above its comfort zone, it is expected to come down in the coming months amidst decelerating growth; despite high crude oil prices and rupee depreciation.
Moreover, even food inflation is likely to soften up on the back of expected record kharif output and satisfactory progress on rabi sowing.