The Reserve Bank of India (RBI), in its June mid-quarter monetary policy on 17 June 2013, left its key policy, repo rate unchanged at 7.25 percent in line. Cash reserve ratio (CRR), remained at 4 percent. Repo is the rate at which banks borrow from the Central bank. CRR is the portion of deposits that banks are mandated to keep with RBI. Consequently, the reverse repo rate will remain unchanged at 6.25 per cent, and the marginal standing facility (MSF), rate and the Bank Rate at 8.25 per cent.
RBI kept the interest rate stable possibly because despite the fact that the inflation rate has been coming down and manufacturing growth has not been much to speak of, it realised that the interest rate difference between Indian markets and Western market has actually shrunk, which is why the Foreign Institutional Investors, who are playing in our debt market have pulled off about three billion dollars. They would not like to aggravate the situation by reducing interest rate at this point of time and encouraging FII to pull out more from the debt market.
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