M A I N   N E W S

Home, auto loan EMIs to remain unchanged
RBI keeps rates intact, cuts SLR by 50 bps
Shiv Kumar
Tribune News Service

Mumbai, August 5
The RBI in its bi-monthly credit policy review today left key policy rates unchanged but reduced the statutory liquidity ratio (SLR) by 50 percentage points.

RBI Governor Raghuram Rajan announced that the central bank was reducing the SLR of scheduled commercial banks by 50 basis points from 22.5% to 22% of their Net Demand and Time Liability (NDTL) with effect from the fortnight beginning August 9, 2014; and continue to provide liquidity under overnight repos at 0.25% of bank-wise NDTL and liquidity under 7-day and 14-day term repos of up to 0.75% of NDTL of the banking system.

However, other key rates were left unchanged. Repo, or the rate at which RBI lends money to banks for the short-term, has been maintained at 8% while the cash reserve ratio (CRR) remains unchanged at 4% of NDTL.

As a result, equated monthly instalments (EMIs) on home, automobile and other loans would remain unchanged.

Sounding optimistic about softening of inflation, the RBI said the recent moderation in CPI headline inflation for two consecutive months was due to base effects and deceleration in CPI inflation, excluding food and fuel. However, the central bank noted that the recent fall in international crude prices, the benign outlook on global non-oil commodity prices and still-subdued corporate pricing power should all support continued disinflation, as should measures undertaken to improve food management.

However, the RBI warned about upside risks to inflation the form of the pass-through of administered price increases, continuing uncertainty over monsoon conditions and their impact on food production, possibly higher oil prices stemming from geo-political concerns and exchange rate movement, and strengthening growth in the face of continuing supply constraints. It is, therefore, appropriate to continue maintaining a vigilant monetary policy stance as in June, while leaving the policy rate unchanged, the RBI said.