India's central bank has decided not to give in to growing political pressure to cut lending rate that caused slowdown in growth. The Reserve Bank of India (RBI) slashed cash reserve ratio (CRR) by 25 bps while leaving lending and borrowing rates unchanged in the second quarter monetary policy review.
With 25 bps cut, the revised CRR stands at 4.25%, which will pump Rs 175 billion as additional liquidity in the banking system. The repo and reverse repo rates continue to stands at 8% and 7% respectively.
Commenting on RBI credit policy, YM Deosthalee, CMD, L&T Finance Holdings said, ''RBI has lowered its GDP growth forecast to 5.7% from 6.5%. Given the low level of investment activity in both manufacturing and infrastructure, particularly in Power, RBI may have to bite the bullet sooner rather than later and take a call to lower interest rates''.
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