Governor Urijit Patel, who headed the policy-setting committee, proposed to take a pause after hiking the rates in its last two successive policy meetings
Mumbai: The Reserve Bank of India has kept the repo rate unchanged at 6.5, the short-term lending rate. The reverse repo rate or the rate at which RBI borrows from commercial banks also remained unchanged at 6.25 per cent.
Governor Urijit Patel, who headed the policy-setting committee, proposed to take a pause after hiking the rates in its last two successive policy meetings.
It was expected and debated that the central bank would increase the rates by 25 basis points to 6.75% in view of the falling rupee, steep rise in crude prices and hike in minimum support price (MSP) for agri-commodities that had stoke inflation concerns.
However, the policy setting committee has said changed its stance on the key policy rates to 'calibrated tightening'. This indicates that RBI may put an upward pressure on the interest rates.
This indicates that now the banks would decide whether they want to hike the interest rates further. In the last three months, many banks and lending institutions have been increasing their interest rates.
State Bank of India, the largest lender, has raised its MCLR by 5 basis points. The new rates were effective from October 1, 2018. This is the fourth hike in this year.
HDFC has also raised its retail prime lending rate by 10 basis points just a couple of days before the monetary policy.
Rupee at 74
Following the announcement, the domestic currency plunged to a new low beyond 74 a dollar, down 0.62% from its previous close. The BSE Sensex was down over 500 points while Nifty traded at 10,400. Rupee was quoted 55 paise lower at 74.13 against the dollar.
The currency gained and opened higher at 73.56 a dollar at the Interbank Foreign Exchange (Forex) market against its previous record low closing of 73.58. But, it failed to sustain the initial strength and fell back to breach the 74-mark.
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Last Updated Oct 5, 2018, 3:53 PM IST