India’s central bank keeps interest rate firm at 8 percent

Nathan Andrada – Fourth Estate Cooperative Contributor

New Delhi, India (4E) – The Reserve Bank of India (RBI) kept its benchmark lending rate steady on Tuesday as it continues to wait for more evidence that the country’s inflation rates are easing.

The overnight lending rate was unchanged at 8 percent for the second consecutive policy meeting by the central bank, which seeks to keep inflation rates in check amid the strengthening rupee and expected moves to expand food supplies by the new government in New Delhi.

The central bank also said it made a policy adjustment that will boost liquidity to the Asia’s third largest economy. The RBI said it would cut the statutory liquidity ratio, the percentage of assets banks are required to invest in government bonds, by 50 basis points to 22.5 percent from June 14.

The Reserve Bank kept the cash reserve ratio, the minimum percentage of deposits that banks are required to keep with the RBI, unchanged at 4 percent.

The RBI has increased its policy rate thrice by a total of 75 basis points since September when its new governor Raghuram Rajan came to the post.

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