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Raghuram Rajan keeps interest rate unchanged at 6.5%

Reserve Bank Governor Raghuram J Rajan presented his last monetary policy review

Policy Pulse
Publish Date: Aug 9 2016 11:55AM | Updated Date: Aug 9 2016 11:55AM

Raghuram Rajan keeps interest rate unchanged at 6.5%

The Reserve Bank of India (RBI) left its monitory policy rate unchanged on Tuesday. The RBI also kept the cash reserve ratio of scheduled banks unchanged at 4.0 per cent of net demand and time liabilities.


RBI took the cognizance of the recent rise in inflation which puts the consumer price index uncomfortably close to the upper tolerance threshold of 6% as mandated by the government.


RBI, however, reiterated that its stance remains accommodative, while adding that it will focus on providing adequate liquidity which will help to improve the pass-through of past rate cuts.


Rajan also said that there is upside risk to the March 2017 inflation target of 5 per cent, but added that it has retained its GDP growth projection at 7.6 per cent for 2016-17.


The stance of monetary policy remains accommodative and will continue to emphasize the adequate provision of liquidity, said the RBI in its monetary policy statement


“Easy liquidity conditions are already prompting banks to modestly transmit past policy rate cuts through their MCLRs (marginal cost lending rates) and pro-active liquidity management should facilitate more pass-through,” the statement further added.


Rajan is set to retire on September 4 after a three-year term. He's said he plans to return to academia in the US.