No lending rate cuts as RBI raises CRR 50 bps

The Reserve Bank of India kept key policy rates unchanged but increased the cash reserve ratio (CRR) on continued inflation concerns, ending any hope of banks reducing lending rates for both retail and corporate borrowers.

In its mid-term review of monetary policy, RBI raised the CRR, the proportion of deposits banks have to keep with the central bank, by 50 basis points to 7.5% from November 10 to absorb about Rs 16,000 crore of excess liquidity.

It has done so owing to persistent underlying inflationary expectations following high global oil prices and liquidity caused by large capital inflows.