RBI likely to keep interest rates unchanged

The Reserve Bank of India (RBI) is likely to keep key rates intact in its policy review Tuesday, with the weakness in the rupee adding to the central bank's growth-inflation dilemma, experts said.

"It is widely anticipated that the central bank would maintain status quo on the policy front," Federation of Indian Chambers of Commerce and Industry (FICCI) president Naina Lal Kidwai said.

The RBI is scheduled to announce first quarter review of the monetary policy for 2013-14 Tuesday.

Kidwai, however, said the RBI must take into consideration the slowdown in growth, especially of industrial sector.

"We need to pay heed to the fact that industrial growth has taken a severe hit. The recently released IIP data indicated negative 1.6 percent growth for May 2013, which is very disappointing," Kidwai told IANS.

"The investment cycle is saddled and a sense of apprehension remains among investors. And this is despite the recent slew of announcements by the government," she said.

President of Associated Chambers of Commerce and Industry (Assocham) Rana Kapoor said even maintaining a status quo would be a big decision considering the current macro economic situation.

"Rate reduction in the monetary policy seems impossible. Status quo itself will be a big decision," Kapoor, also managing director and chief executive officer of Yes Bank, said at a media briefing last week.

In its last policy review announced June 17, the RBI had left key rates unchanged.

Currently the repo rate, the rate at which the RBI borrows money from the commercial banks, is 7.25 percent and the reverse repo rate is at 6.25 percent.

The cash reserve ratio (CRR), or the share of deposits banks must keep with the RBI, is 4 percent.