No Change in Reserve Bank of India Rates

The Reserve Bank of India has kept all key rates unchanged in a bid to maintain financial and price stability. In its third quarter review of credit policy, the RBI also kept growth projection unchanged at 8.5 per cent and inflation close to 5 per cent in 2007-08.

The RBI Governor, Dr Y V Reddy, today presented the third quarter review of Annual Statement on Monetary Policy 2007-08.

Adopting a cautious approach, particularly with the possibility of rising inflation in the wake of surging global oil prices, RBI kept the benchmark bank rate unchanged at 6 per cent. This is the rate at which the central bank lends to commercial banks.

The short-term borrowing i.e reverse repo was kept intact 6 per cent while lending rate i.e repo rate was kept at 7.75 per cent. Repo is the rate at which the apex bank infuses liquidity into the system, while reverse repo is a tool to suck out excess liquidity.

The Cash Reserve Ratio, a statutory deposit by commercial banks with the central bank, was retained at 7.5 per cent.

Highlighting the risk of global financial developments, Reserve Bank asked banks to review large foreign currency exposure to ensure that volatility does not impact their balance sheets of corporate with large external liabilities.

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