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RBI keeps interest rates unchanged. Sensex cheers.

The much awaited RBI’s monetary policy decision has come as a pleasant surprise, as the Central bank has decided to keep the interest rates unchanged for now. It was widely expected that the RBI would resort to increase in 25 bps hike in the interest rates, as it has done in the previous reviews, citing high Inflation situation.

However Raghuram Rajan, RBI’s governor chose to keep it unchanged this time. “The policy decision is a close one. Current inflation is too high,” added the RBI statement.

With this, the policy Repo rate remains unchanged at 7.75 per cent; and the cash reserve ratio (CRR) unchanged at 4.0 per cent

Also Read : What do the interest rates mean – Repo rate and CRR – Explained

The Reserve Bank of India has been struggling to revive the Indian economy, which has moved on to a very sluggish phase. However the current high inflationary situation is not allowing the policy makers to play around much, as it has become virtually impossible to contain the inflationary monster.

Bankers Welcome

The Banking community has in large welcomed the decision of the RBI to keep the rates unchanged. Bankers have lauded Raghuram Rajan’s decision as he noted that the inflation is expected to come down in the coming weeks.

Markets cheer

Markets have shown a sudden surge, following the announcement of the RBI’s decision. Markets remained subdued as cautionary trades happened in the morning. However the Sensex and the Nifty have seen hikes of nearly 1 percent following the news. Banking stocks are on the surge. ICICI Bank has moved up by over a percent to trade at 1112. Axis Bank has gained 2.5%. PSU Major SBI has also moved up by 2.5%. Other banks including PNB, Canara Bank and Dena Bank have all gained in the trade.



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