Raghuram Rajan RBI Governor
RBI Governor: Economy is recovering, process is volatile. Picture (Representational Image)Reuters

At the bi-monthly monetary policy review meeting on Tuesday, the Governor of the Reserve Bank of India Raghuram Rajan decided not to change the repo rate, which was cut twice by 25 basis points, in mid-January and mid-March.

The RBI kept the repo rate unchanged at 7.5%, the Cash Reserve Ratio (CRR) at 4% and Statutory Liquidity Ratio (SLR) at 21.5%. The repo rate is the interest rate at which the central bank lends money to commercial banks while SLR and CRR are used to adjust liquidity, Money Control reports.

The RBI's decision to avoid the changes in monetary key rates comes in the backdrop of slight improvement in inflation. 

The central bank lowered its January 2016 inflation forecast to 5.8 percent from 6 percent earlier.

"Transmission of policy rates to lending rates has not taken place so far despite weak credit off take and the front loading of two rate cuts. With little transmission, and the possibility that incoming data will provide more clarity on the balance of risks on inflation, the Reserve Bank will maintain status quo in its monetary policy stance in this review," The Economic Times cited an excerpt from Rajan's statement.

The RBI has decided to "stay focussed on ensuring that the economy disinflates gradually and durably, with CPI inflation targeted at 6 per cent by January 2016 and at 4 per cent by the end of 2017-18".

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