Highlights: No relief for borrowers yet as RBI holds rates

The Reserve Bank of India (RBI) in its third bi-monthly monetary policy review for fiscal 2014-15 has decided to keep key lending rates to commercial banks unchanged.

The central bank has kept its repo rate (at which it lends money to commercial banks) unchanged at 8 per cent. The cash reserve ratio (CRR) was also kept unchanged at 4 per cent.

This is the third time that RBI Governor Raghuram Rajan kept interest rates unchanged.

The statutory liquidity ratio (SLR), the mandatory amount of bonds lenders must keep with the RBI, was cut by 0.5 per cent to 22 per cent of their net demand and time liabilities (NDTL) with effect from August 9, 2014.

Rajan has raised interest rates three times since he took office in September 2013, even as economic growth slowed to decade-low rates.

He has set a target of bringing down consumer price inflation to 8 per cent by the end of the fiscal and to 6 per cent by the next fiscal.

Following are the highlights from the report and subsequent press conference by RBI Governor Raghuram Rajan:

>> Inflation target at 8 per cent by January 2015, 6 per cent by January 2016.

>> GDP growth rate for current fiscal at 5.5 per cent, within 5-6 per cent range projected in April.

>> 5.5 per cent growth rate achievable.

>> RBI will continue to monitor and manage cash conditions.

>> Portfolio flows to emerging markets increase.

>> HTM ceiling cut by 24 per cent.

>> Emerging markets will continue to be vulnerable to changes in the US monetary policy.

>> Considering more frequent term repo auctions.

>> Looking at doing term repos for short terms.

>> Policy tightening unwarranted if growth pick-up sustains.

>> SLR has been cut as governtment is on the path for fiscal consolidation.

>> SLR cut creates room to lend more to productive sectors.

>> Cut in SLR wil allow banks to meet some liquidity ratios.

>> SLR cut was not intended to make loans cheaper.

>> SLR cut will help the government manage its finances.

>> RBI, government trying to improve macro fundamentals of economy.

>> Cut in SLR is more about planning than immediate effect.

>> Infrastructure pick-up must to improve bottle-necks in the supply side.

>> There is no doubt that the government is on a fiscal consolidation path.

>> The country is in a much better position now to fight inflation risks.

>> Cannot extrapolate the Syndicate Bank issue to the enire banking system.

>> Would prefer removing some domestic constraints on banks.

>> Government assured of taking steps to get food inflation under control.

>> Would prefer giving more flexibility to banks to meet Liquidity coverage ratio (LCR) norms.

>> Considering keeping overnight rate close to 8 per cent.

>> We should not be complacent about vegetable prices as some seasonality exists.

(*An earlier version of this story had incorrectly mentioned in the headline that SLR has been hiked by 50 basis points. The RBI has cut the liquidity ratio. The error is regretted)