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Indian central bank maintains policy rates

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Indian central bank maintains policy rates

The Reserve Bank of India kept its policy rates unchanged, reflecting its neutral stance on monetary policy.

In a five-to-one vote, the central bank's monetary policy committee maintained the policy repo rate under the liquidity adjustment facility at 6.25% and the reverse repo rate under the liquidity adjustment facility at 6.0%. The marginal standing facility rate and the bank rate remain unchanged at 6.50%.

The central bank said a drop in inflation in April has raised several issues regarding its inflation projections. If the momentum in April persists, headline inflation could be in the range of 2.0% to 3.5% in the first half of the year and 3.5% to 4.5% in the second half. Despite headline inflation having dropped to below 4% since November 2016, RBI said it remains committed to keeping headline inflation close to its 4% target.

Further, the central bank stressed the need to revive private investment, restore banking sector health and remove infrastructural bottlenecks in order for monetary policy to play a more effective role. Premature action at the current stage could lead to disruptive policy reversals later and the loss of credibility, it added.

The regulator will continue to monitor incoming data and will meet in August for its next policy meeting.