Reserve Bank of India retains CRR at 6.5 pc

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Mumbai, Oct 24: On Friday, Oct 24 the Reserve Bank of India retained its policy rates and reserve ratios unchanged in its half yearly review of the monetary policy. The Bank Rate has been kept unchanged at 6.5 pc. The repo rate under the LAF has also been kept unchanged at 8.0 per cent, and so also the reverse repo rate at 6.0 per cent.

The Cash Reserve Ratio (CRR) of scheduled banks is currently at 6.5 per cent of net demand and time liabilities. RBI saidn that keeping in view of the current liquidity situation, it has been decided to keep the CRR unchanged. Also the Central Bank revised the GDP growth target to 7.5-8 pc from the 8.0 pc earlier. Inflation target for the financial year of 2009 has been retained at 7pc.

The RBI's policy stance has shifted from containing inflationary expectations to growth with the Index of Industrial Production dropping to 1.3 pc in August from 10 per cent a year ago and 7 per cent in the previous month. Also, the monetary tightening measures announced earlier have seen the inflation rate easing to 11.07 per cent from 11.44 per cent last week.

One big nagging factor for the Central Bank is the unprecedented depreciation of the rupee against the US dollar. On Friday, Oct 24, the Indian currency fell to a low of 50.15 to the dollar due to heavy losses in Asian and domestic stock markets, which has raised concerns of more outflows.

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