- To augment the investment of the banks in Government securities.
- To ensure solvency of banks. A reduction of SLR rates looks eminent to support the credit growth in India.
As expected, the central bank left the repo rate , at which it lends to banks, unchanged at 6.25 percent and also kept the reverse repo rate , at which it absorbs excess cash, on hold at 5.25 percent. The RBI left the cash reserve ratio (CRR) , or the portion of deposits banks need to set aside as cash with the central bank, unchanged at 6 percent.
Indian oil retailers raised petrol prices by 5.6 percent this week and the government is expected to lift diesel prices soon by roughly 2 rupees a litre, moves that together could lift WPI inflation by 30 basis points and have a knock-on effect of the same magnitude as costs are passed along.