Reserve Bank keeps key rate unchanged, cuts SLR

Mumbai, Feb 3: The Reserve Bank today left interest rate unchanged saying there was no substantial development on inflation or fiscal fronts to warrant a fresh reduction. This stance follows a surprise rate cut by RBI on January 15 to tackle disinflationary pressure.

"Given that there have been no substantial new developments on the disinflationary process or on the fiscal outlook since January 15, it is appropriate for the RBI to await them and maintain the current interest rate stance," RBI Governor Raghuram Rajan said in the sixth bi-monthly monetary policy statement.

Accordingly, the RBI left the short-term lending rate or repo rate at 7.75 per cent and the cash balance requirement on the lenders or CRR at 4 per cent. But to help exports sector, which of late has been struggling following more headwinds in the global economy, the central bank has decided to replace export credit refinance facility with the provision of system level liquidity with effect from February 7.

Also, RBI slashed Statutory Liquidity Ratio (SLR), a percentage of funds banks have to necessarily park with RBI, by 50 basis points to 21.5 per cent. On inflation, the policy document took consolation in the declining trend and noted that even the upturn in December turned out to be muted relative to projections.

"Heightened volatility in global financial markets, including through the exchange rate channel, also constitute a significant risk to the inflation assessment. Looking ahead, inflation is likely to be around the target level of 6 per cent by January next.

PTI