No EMI relief on loans as RBI keeps interest rates unchanged

The repo rate, at which the Reserve Bank of India lends to banks, has been retained at 6.50 percent on inflation concerns signaling that banks are not likely to cut rates on loans given to consumers.

Zee Media Bureau

The Reserve Bank of India (RBI) on Tuesday kept interest rates unchanged at its second bi-monthly monetary policy review amid lingering concerns over inflation, after having already cut the repo rate by a 25 basis points at its last meet.

The repo rate, at which the Reserve Bank of India lends to banks, has been retained at 6.50 percent. The cash reserve ratio (CRR) for banks has been kept unchanged at 4 percent.

RBI Governor Raghuram Rajan said, though the rates are on hold, the stance of monetary policy remains accommodative. The Governor added that global growth is struggling to get traction; variety of factors will come into play while deciding the bank rates.

"April inflationary trend has made the trajectory uncertainty", indicating inflation is on upside, said the Governor.

Inflation based on the consumer price index rose to 5.5 percent in April, from 5 percent in March, mainly on the back of rising food prices. "We will have to attain measures to reach 5% inflation target for 2017", said Rajan 

RBI has also kept FY17 GDP target unchanged at 7.6 percent.

Talking about the volatility of rupee and curbing it, Raghuram Rajan said, 'we have no desire in moving rupee in any direction". RBI is not averse to selling dollars in case of extreme volatility seen in Rupee, he added.

On the investment scenario in the country, RBI said in its policy statement said that public investment is stronger, but private investment is worrisome, 

Deputy Governor HR Khan added that the central bank is committed to reining in volatility in the market, and will take all possible steps to do that. 

On the impact of oil prices on oil remittances, RBI said that Oil remittances are not expected to be affected by the current movement in oil prices, and is not a cause for worry, said RBI said.

RBI top boss added that the central bank is working with the government and SEBI with respect to the cleans up of PSU banks' balance sheet.

On banks not passing on the rate cut consumers,  RBI governor said, "We do not want to interfere in the contractual process, it will create all sorts of difficulties. Ultimately it is the competition will set of the process". The healthy banks will start the process, added the Governor.