Mumbai, June 18 (PTI): The Reserve Bank of India kept policy rates unchanged on Monday in view of rising inflation and global economic uncertainty, pulling down stocks markets sharply.
Besides, the central bank also kept cash reserve ratio (CRR) or the percentage of deposits that banks have to keep with RBI unchanged at 4.75 per cent.
RBI, in its mid-quarterly review of the monetary policy said that the future action would depend upon on external factors, domestic developments and inflationary risks.
”Future actions will depend on a continuing assessment of external and domestic developments that contribute to lowering inflation risks,” RBI said.
Stock markets fell sharply after having opened high in the morning on rate cut hopes. However, after the RBI policy announcement, the BSE 30-scrip index, Sensex, fell by over 200 points to below 17,000-mark it had crossed in the morning trade.
Experts were expecting the RBI to cut the repo by at least 0.25 per cent and were also looking forward to further cut in CRR to infuse more liquidity in the financial system.
While the short term lending rate has been kept unchanged at 8 per cent, CRR remains at 4.75 per cent.
In order to help export sector, RBI has raised limit of export credit refinance from 15 per cent of outstanding export credit of banks, to 50 per cent.
This will further augment liquidity and encourage banks to increase credit flow to the export sector, RBI said.
The decision will potentially release additional liquidity of over Rs 30,000 crore, equivalent to about 0.5 per cent of reduction in the CRR, RBI said.
Countering the argument that high interest rate has been the reason behind the record dip in growth, RBI said the real effective bank lending rates are still lower than the high growth period of 2003-2008.
“This suggests that factors other than interest rates are the contributing more significantly to the growth slowdown,” it said.
The cautious stance comes at a time when pressure has been mounting on the Mint Road mandarins to do something to revive the sagging growth and boost sentiment, which dipped to a nine-year low of 5.3 percent for three months ending March.
The Gross Domestic Product (GDP) growth for the fiscal 2011-12 also plunged to 6.5 per cent, lower than the 6.7 per cent reported during the peak of post-Lehman collapse credit crisis.
Bankers, led by the country's largest lender State Bank of India, were rooting for a cut in CRR saying it will help in quicker transmission while a slew of think-tanks and analysts were expecting a 0.25 per cent cut in repo rates, given the dismal growth data.
In its guidance, RBI said the policy will be guided by the evolving growth-inflation dynamics, with an eye on the external and domestic development that contribute to lowering inflation risks.