Indian central bank leaves rates unchanged, eases reserve ratio

PUBLISHED : Monday, 17 September, 2012, 2:28pm
UPDATED : Monday, 17 September, 2012, 2:28pm

India’s central bank on Monday left interest rates unchanged but cut the cash reserve ratio for banks, saying the primary focus of monetary policy remains fighting inflation, days after the government unveiled a spree of reforms to boost growth and improve its fiscal position.

The Reserve Bank of India left the policy repo rate at 8 per cent, in line with expectations in a Reuters poll on Friday before the government unexpectedly announced measures to allow foreign direct investment in industries including supermarkets and airlines.

The RBI cut the cash reserve ratio, the share of deposits banks must keep with the central bank, by 25 basis points to 4.5 per cent in a move it said will inject about 170 billion rupees (us$3.12 billion) of liquidity into the banking system.

On Thursday, the government announced a sharp increase in the price of heavily subsidised diesel.