Highlights: RBI holds rates, inflation still a concern

MUMBAI (Reuters) - The Reserve Bank of India kept interest rates unchanged on Monday after cutting them in each of its previous three policy reviews, warning of upward risks to inflation posed by a falling rupee and increases in food prices.

The RBI also called for vigilance over global economic uncertainty, citing the risks of a reversal of capital flows from emerging markets. Such outflows would exacerbate the country's high current account deficit.

Following are highlights from the monetary policy statement:

POLICY MEASURES

* Keeps repo rate unchanged at 7.25 percent.

* Reverse repo rate stays at 6.25 percent.

* Cash reserve ratio unchanged at 4.00 percent.

* Marginal Standing Facility rate stays at 8.25 percent.

* Bank rate stays at 8.25 percent.

POLICY STANCE

* Only "durable" receding of inflation will open up space for monetary policy to address growth risks.

* There are upside risks to inflation on rupee weakness, increases in administered prices.

* Need to be vigilant about global uncertainty, rapid shift in risk perceptions, impact on capital flows.

* Monetary policy stance to be determined by growth, inflation and balance of payments situation in months ahead.

CURRENT ACCOUNT

* Main challenge is to reduce the current account deficit to a sustainable level.

* Evidence suggests a moderation in gold imports could be underway in June.

* Perseverance with fiscal consolidation should help in mitigating risks to outlook to fiscal and current account deficits.

* Softer global commodity prices, recent steps to dampen gold imports are expected to moderate current account gap in 2013/14.

INFLATION, LIQUIDITY

* Inflation outlook will be influenced by "concerted" efforts to break persistent food inflation.

* Upside pressures on the way forward from the pass-through of rupee depreciation, recent increases in administered prices and persisting imbalances, especially relating to food, pose risks of second-round effects.

* Lower bank borrowing from RBI repo window reflects sizable injection of primary liquidity via OMO, decline in government cash balances.

* See the India Online special page on the RBI policy review, click http://in.reuters.com/subjects/rbi-policy-review

(Compiled by Neha Dasgupta; Editing by Ranjit Gangadharan)