This is the fourth consecutive time that the RBI has kept key interest rates unchanged despite clamours from the industry to cut rates to boost economy.

The short-term lending rate (repo) rate now stands at 8 percent, and the cash reserve requirement of banks at 4 percent. The statutory liquidity ratio (SLR) has also been retained at 22 percent.

Explaining the rationale for status quo policy, Rajan said though WPI inflation has ebbed to levels consistent with 8 per cent inflation by January 2015, "there are risks from food price shocks as the full effects of the monsoon's passage unfold, and from geo-political developments that could materialise rapidly."

Read more: Rajan softens stance on Jan Dhan, says it's a welcome scheme

He said that there are "uncertainties" over food inflation even though 6 percent retail inflation target by January 2016 remains a possibility.

"The future policy stance will be influenced by the RBI's projections of inflation relative to the medium term objective of 6 percent by January 2016, while being contingent on incoming data," Rajan said.

 

Highlights
RBI keeps interest rates unchanged fourth time in row
Short-term lending rate (repo) rate stands at 8 percent
Statutory liquidity ratio (SLR) retained at 22 percent
RBI retained the growth projection for the current fiscal at 5.5 percent
Apex bank sees FY16 growth at 6.3 percent

The RBI also retained the growth projection for the current fiscal at 5.5 percent. The apex bank sees FY16 growth at 6.3 percent.

Stock markets remained flat with BSE Sensex at 26,626 points.

The WPI inflation dipped to a 5-year low of 3.74 percent in August, while the retail inflation stood at 7.8 percent.

Rajan said, "the balance of risks is still to the upside, though somewhat lower than in the last policy statement. This continues to warrant policy preparedness to contain pressures if the risks materialise".

He said the fall in crude prices and relative stability in the foreign exchange contains some of the upside risks to inflation.

Read more: RBI projects GDP growth to accelerate to 6.3 percent next fiscal

On growth, Rajan said second and third quarter growth will lower than the first quarter, but the fourth quarter looks more promising.

The Governor also said the final guidelines on small banks and payments banks will be issued by end-November, while the final norms with regard to the changes in the regulatory framework for NBFCs will be introduced by end-October.

Rajan reduced the liquidity provided under the export credit refinance (ECR) facility from 32 percent of eligible export credit outstanding to 15 per cent with effect from October 10.

RBI, however, continued to provide liquidity under overnight repo at 0.25 percent at the LAF repo rate and liquidity under 7-day and 14-day term repos of up to 0.75 percent through auctions.

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