RBI’s Policy Review Keeps CRR and Repo Rates Unchanged

The Reserve Bank of India (RBI) has disappointed retail borrowers, auto & real estate industry who are expecting at least 0.25% rate cut on June 18. RBI announced that it decided to keep CRR (Cash Reserve Ratio) and repo rate unchanged at 4.75% and 8% respectively.

RBI in its monetary policy review said that inflation remains above comfort levels, any rate cut at this moment could worsen inflationary pressures. The retail inflation rate in May has moved up marginally to 10.36% from 10.26% for the month of April.

The Central Bank feels that there are many factors others than interest rates responsible for the slowdown of growth. RBI opines that depreciating rupee should help in expanding exports, by acting as demand stimulus.

RBI in its monetary review has offered some help to exporters. It raised Export Credit Refinance (ECR) limit from 15% to 50% with a view to release liquidity of about Rs.30,000 crores equal to 50bps CRR cut.

Thus in a bid to control inflation, RBI’s decision of not reducing policy rates, brings no smiles to borrowers and disappointed car-makers and real estate players who are suffering because of high interest regime.

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