Third Monetary Policy Review-No Change in Interest Rates

Banking Economy News



(Author is an Ex-Banking Executive)



As expected, while announcing the third Monetary Policy Review, RBI has not changed any interest rates, keeping repo rate as 7.25per cent and reverse repo rate as 6.25 per cent. RBI has kept the growth target for the current fiscal as 7.6 per cent.


There was tremendous pressure from industry segments to lower the interest rates but RBI’s decision to keep the rates unchanged is in light of the food prices which went soaring, pushing the inflation to eight month high.


It is further informed that at the time of fourth review of Monetary Policy, economic reforms of the Government and change in the interest rate structure of US shall be the determining factors for changing interest rates by RBI.


Raghram Rajan, Governor RBI has categorically mentioned that there are several Banks who have not passed or partially passed, the reduction in interest rate cuts of January, 2015. It is indicated that economic reforms are on the agenda of the Government like curbing the food and fuel inflation, improving supplies mostly depending on spread of monsoon, US Fed policy and international fuel pricing.


It is expected that RBI shall cut rate in fourth review i.e. in September, 2015

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