RBI waiting to see how inflation risks pan out: Urjit Patel

Mumbai: The Reserve Bank of India would be ready to take policy action if upside risks to inflation do not materialise, Governor Urjit Patel said on Wednesday after the central bank announced it was holding interest rates steady for now.

The RBI kept repo rate unchanged at 6.5% in its monetary policy review meeting.

“Given the assessment that growth will likely remain healthy for the rest of the year, the MPC (monetary policy committee) retained its stance at calibrated tightening so as to buy time to pause, reflect and undertake future policy action with more robust inflation signals,” Patel said.

“If the upside risks we have flagged do not materialise or are muted in their impact as reflected in incoming data there is a possibility of space opening up for commensurate policy actions by the MPC.”

In its monetary policy review meeting, the central bank also said starting in the January-March quarter of 2019 it would begin to lower banks’ mandatory bond holding ratios by 25 basis points each quarter until it reaches 18% of deposits. The statutory liquidity ratio (SLR) currently stands at 19.50% and the move to lower the SLR should prod banks to lend more rather than park their cash in safe-haven government securities.

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