The Reserve Bank of India kept key rates unchanged in its policy review meet today, but cut the
by 50 bps to 22%.
The statutory lending ratio, or the portion of capital that banks must park with RBI in the form of bonds, was cut by 50 bps to 22%, thus freeing up funds for banks.
The RBI also cut the ceiling on debt that must be held-to-maturity by half a percentage point to 24%.
“RBI’s policy today has been slightly hawkish than the last statement by shifting the inflation target from 8 percent towards the medium term target of 6 percent, thereby further affirming our view of a pause on the repo rate front at least through this year,” said Upasna Bhardwaj, economist at ING Vysya Bank.
Warning about inflation, RBI in a statement said, “With some continuing uncertainty about the path of the monsoon, it would be premature to conclude that future food inflation, and its spill-over to broader inflation, can be discounted.”