The Reserve Bank of India (RBI) kept the repo rate unchanged at 7.5% in its monetary policy review on Tuesday. Along market expectations, Raghuram Rajan also kept the Cash Reserve Ratio (CRR) at 4%.
Rajan 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.
"Transmission of policy rates to lending rates has not taken place so far despite weak credit off take and the 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 in its monetary policy stance in this review," said Rajan in his statement.
Unseasonal rains and hailstorm have impacted rabi crops across North and Western India, raising fears of spike in food prices.
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