The Reserve Bank today kept key policy rates unchanged in view of high food inflation, the declining value of rupee and global uncertainty, disappointing India Inc as well as retail borrowers.
The repo rate, at which RBI lends to banks, has been retained at 7.25 per cent, while the Cash Reserve Ratio (CRR) will continue to be 4 per cent.
"The monetary policy stance has been informed by the evolving growth-inflation dynamics, the balance of risks as well as recent developments in the external sector," RBI Governor D Subbarao said in the mid-quarter policy review.
Finance Minister P Chidamabram, who appeared disappointed by the monetary policy, said: "I think the government at various levels conveyed its view to RBI. This is a mid-term review. We recognise that RBI is independent. There is nothing more for me to say at this stage."
Bankers too sounded unhappy and said that there was no scope for them to reduce lending rate.
Bank of India chairperson and managing director V R Iyer said there will be no change in lending rates as the cost of deposits continues to be very high.
Expressing disappointment over RBI's decision, India Inc said the time was appropriate for cut in interest rates to revive the country's economic growth.
The industry hoped that RBI would not wait for the next quarterly review on July 30 to intervene, and would do so earlier if required.
In its guidance, RBI particularly flagged risks on inflation, saying "it is only a durable receding of inflation that will open up the space for monetary policy to continue to address risks to growth".
Commenting on the RBI action, Prime Minister's Economic Advisory Council Chairman C Rangarajan said the decision has been influenced by external sector considerations, specially widening current account deficit.
