Concerned over economic slowdown, the Reserve Bank today kept interest rates unchanged and indicated that it could cut key policy rates from now onwards to arrest falling growth while keeping a close vigil on inflation.

"While inflation remains on its projected trajectory, downside risks to growth have clearly increased... Further rates hike may not be warranted," the Reserve Bank of India (RBI) said in it its mid-quarter review of monetary policy.

The economic growth has come down to 6.9 per cent in the second quarter of the current fiscal from 8.1 per cent in the corresponding quarter in the previous financial year even as inflation remains close to the double-digit mark. The industrial growth registering a negative growth of 5.1 per cent in October too may have prompted RBI to maintain the status quo.

The central bank maintained repo (rate at which banks borrow from RBI) at 8.5 per cent, reverse repo (rate at which the RBI borrows from banks) at 7.5 per cent.

The halt in rate increase comes after 13 hikes since March 2010.

The RBI has also decided to retain the cash reserve ratio (CRR), the amount banks need to park with the RBI, at six per cent. The industry was expecting a marginal cut in the CRR to induce liquidity in the system to promote investments.

"I cannot really speculate on when we might start cutting rates, but certainly that is an event, that an action that is on the way forward...," RBI Governor D Subbarao said on the sidelines of an event.

The RBI will make an assessment of its growth and inflation projections for 2011-12 in the third quarter review next month, the policy statement said.

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Can't speculate on rate cuts, will ensure enough liquidity: RBI

Reserve Bank Governor D Subbarao today said he cannot speculate on when he will start cutting policy rates, but assured that the central bank will ensure that there is enough liquidity in the system by conducting open market operations.

"We have taken into account the inflation situation and also growth moderation. For the moment, we have kept the policy rates steady. However, we will manage liquidity through market operations (but) I cannot speculate when we might start cutting rates," he said while speaking to reporters at an ICAI function here.

In its mid-quarterly review of monetary policy today, RBI today maintained repo (rate at which banks borrow from RBI) at 8.5 per cent, reverse repo (rate at which the RBI borrows from banks) at 7.5 per cent.

The halt in rate increase comes after 13 hikes since March 2010.

The central bank has also decided to retain the cash reserve ratio (CRR), the amount banks need to park with the RBI, at six per cent.

On the steep fall in the rupee, he said, "Certainly, it will put pressure on inflation, and we have acknowledged that in our review today."

The domestic currency had been on a free-fall and it plunged to an all-time record low of sub-54 level yesterday during intra-day.

Last evening, the RBI moved swiftly to check the slide in rupee value and speculations by imposing restrictions on forward trading in the local currency by FIIs and traders and by capping banks' exposure to the forex market.

The impact of RBI steps was visible today with the rupee surging by a whopping 143 paise to Rs 52.21 per US dollar in early trade today.

FM welcomes RBI''s decision to keep rates unchanged 
(New Delhi)

Finance Minister Pranab Mukherjee today welcomed the Reserve Bank's decision to keep policy rates unchanged and expressed the hope that inflation would moderate in the coming weeks.

"The need to improve the business sentiments and recover the growth momentum in the remaining months of the current fiscal necessitated a review of the monetary policy stance.

"I believe that inflation will moderate further in the coming weeks and, therefore, the announcement today is welcome," Mukherjee told reporters outside the Parliament House complex.

Concerned over economic slowdown, the Reserve Bank of India (RBI) today kept policy rates unchanged. The central bank maintained repo (rate at which banks borrow from RBI) at 8.5 per cent, reverse repo (rate at which the RBI borrows from banks) at 7.5 per cent.

The Finance Minister also welcomed steps taken by RBI yesterday to check the rupee's slide and speculations by imposing restrictions on forward trading in the local currency by FIIs and traders, and by capping banks' exposure to the forex market.

"I also welcome the Governor's resolve to check the speculative interventions in foreign exchange market which among other factors have contributed to the sharp depreciation of the Indian rupee against the US dollar," Mukherjee said.

He further hoped that today's announcement should help in regaining India's growth momentum with improved macro economic parameters in the remaining period of fiscal year 2011-12.