RBI kept Key Policy Rates Unchanged in its Mid-quarterly Monetary Policy Review

The Reserve Bank of India in its mid-quarterly monetary policy review on 18 June 2012, decided to keep the cash reserve ratio and the policy repo rate unchanged at 4.75 per cent and 8.0 per cent respectively. The reverse repo rate remain unchanged at 7.0 per cent. The marginal standing facility rate and the Bank Rate is to stand at 9.0 per cent.

Further reduction in the policy rate at the time when the inflation is still above the comfort level of the people is likely to aggravate the inflationary pressures. The RBI while announcing its monetary policy opined that there are several other factors other than policy rates, which are affecting the growth and investment activities in the country.

The slowing pace of the economy (India's March quarter economic growth stood at 5.3 per cent, lowest in past 9 years) and weakening investment sentiments had prompted industry leaders to urge RBI to take a call on policy rate cuts.

International credit rating agency Standard & Poor's had warned that India could be the first BRIC nation to lose its investment-level credit rating due to its fragile outlook of economy and frozen policy reforms,

The RBI did not however pay much heed to the industry’s concerns of sinking growth and concentrated on taming the unrelenting inflation. India witnessed inflation figure rose to 7.55 percent in May 2012, which is the highest among industrialised countries and the BRIC group of nations.

The central bank had earlier reduced the key policy rates by 50 basis points in its quarterly review of monetary policy on April 2012.