(Image source from: RBI keeps rates unchanged})

Reserve Bank of India on today kept its policy rates unchanged, while the governor Raghuram Rajan said that the headline inflation is at elevated levels and banks are yet to pass on the full benefits of previous rate cuts. The repo rate will continue to be at 7.25 percent and the cash reserve ratio will remain at 4 percent.

Rajan said, "Some food prices, particularly of protein-rich items, pulses and oilseeds have risen sharply in recent months. They will have to be carefully monitored as they tend to be sticky and impart an upward bias to inflation and inflation expectations. This assumes significance in view of households’ inflation expectations rising again."

The RBI Governor talked about the possibility of taking away the veto rights from the Governor to a committee. "There are three virtues of taking away the veto rights from from Governor and giving it to a committee. We have been supporters of this committee. We have been engaged with the Government. The structure should ensure continuity in policy. The Government and the RBI have reached a broad consensus on what the committee should look like and what the role of the Governor would be," Raghuram Rajan said.

By Premji