RBI Keeps Repo Rate Unchanged At 6.5%

The RBI’s Monetary Policy Committee (MPC) has kept its repo rate unchanged at 6.5 percent in October.

The RBI has kept its repo rate unchanged at 6.5 percent in October.

(Photo: Reuters)

The Reserve Bank of India (RBI) has kept its key interest rate unchanged at its penultimate monetary policy review of the fiscal on Wednesday, 5 December, reported news agency ANI.

The reverse repo rate remains unchanged at 6.25 percent and the Bank Rate at 6.75%.

The review comes at a time when inflation, the central bank's key concern, has softened, as has GDP growth, according to the figures for the second quarter ending in September.

At its previous bi-monthly review in October, the RBI's Monetary Policy Committee (MPC) had held its repo rate, also called the short-term lending rate, unchanged at 6.5 percent in the context of rising crude oil prices posing an inflationary risk as well as a weakening rupee.

The RBI’s policy review is also being held amid the slowdown in growth and private investment, and an alleged tiff between the government and the central bank over liquidity crunch.

The government's differences with the RBI centres on four issues – the former wants liquidity support to head off any credit freeze risk, a relaxation in capital requirements for lenders, relaxing the prompt corrective action (PCA) rules for banks struggling with accumulated non-performing assets (NPAs), or bad loans, and support for micro, small and medium enterprises.

The current liquidity crunch, particularly among non-banking finance companies, follows a series of defaults last month by the privately-run IL&FS and banks hesitating to lend after a series of scams, most notably the Rs 14,000 crore fraud on state-run Punjab National Bank reported in February.

(With inputs from IANS)