RBI keeps rates unchanged; changes stance to neutral

The Reserve Bank of India (RBI) on Wednesday kept its key policy rate unchanged.

Due to demonetisation, the banks are already flush with funds and any rate cut may not deliver the desired results.

The repo rate remains unchanged at 6.25 per cent. 

The central bank's  monetary policy committee on Wednesday voted 6-0, its third unanimous decision in a row and opted to wait for more clarity on inflation trends.

The policy saw the central bank change its stance from accommodative to neutral, which would be seen as a hawkish move.

Before the meeting, analysts were split on what the RBI would do. In a Reuters poll last week, 28 of 46 participants saw the central bank cutting the repo rate by a quarter point and two expected a 50 bps cut.

But others correctly predicted the RBI would wait until its next policy review in April.

"The decision of the MPC (monetary policy committee) is consistent with a neutral stance of monetary policy in consonance with the objective of achieving consumer price index (CPI) inflation at five per cent by Q4 of 2016-17 and the medium-term target of four per cent within a band of +/- two per cent, while supporting growth," RBI said.