Borrowers will have to wait for more time to see their equated monthly installments (EMIs) and loan repayment schedules easing as the Reserve Bank of India (RBI) on Tuesday kept key interest rates unchanged, making it clear that it may not cut rates until consumer price inflation falls to the targeted level of 6 per cent.
RBI Governor Raghuram Rajan kept the benchmark repurchase rate — the rate at which the RBI lends funds to banks — at 8 per cent in his fourth bi-monthly monetary policy, as forecast by bankers and analysts. “Let us complete the full course of medicine. You can’t take the patient out of the medicine before he’s cured. You need to have the discipline to stay the course,” Rajan said in a media interaction after unveiling the policy here.
“The future policy stance will be influenced by the RBI’s projections of inflation relative to the medium-term objective of 6 per cent by January 2016, while being contingent on incoming data,” Rajan said. The RBI also kept the cash reserve ratio unchanged at 4 per cent and the statutory liquidity ratio at 22 per cent.
Since June, headline consumer inflation has ebbed to levels which are consistent with the desired near-term glide path of disinflation — 8 per cent by January 2015. There has been a steady decline in inflation excluding food and fuel, by a cumulative 111 basis points since January 2014 to a new low of 7.8 per cent in August. The RBI has retained the projection of growth for 2014-15 at 5.5 per cent within a range of 5 to 6 per cent around this central estimate.