RBI adopts a cautionary approach on policy rates

In lieu of moderately rising inflation, increase in global commodity prices, volatile US interest rates and global economic performance, RBI has adopted a cautious approach without changing the policy rates at this stage.

As expected, the policy rate remains unchanged at 6.5%, So does the banks’ cash reserve ratio or the portion of deposits that commercial banks need to keep with the RBI (at 4% of their deposits).

Data since the last monetary policy meeting showed a sharper-than-anticipated surge in inflationary pressures emanating from a number of food items as well as a reversal in commodity prices.

Given the uncertainties, the Reserve Bank of India said it would stay on hold, but the stance of monetary policy remains accommodative. "RBI will monitor macroeconomic and financial developments for any further scope for policy action," said the RBI statement.