Amid rising inflation and high crude oil prices, the six Monetary Policy Committee (MPC) members will decide the key policy rate at their three-day meeting starting today.
The seven-quarter high growth rate of 7.7 per cent in January-March 2018 and forecast of a normal monsoon has reduced the clamour for a cut in the benchmark lending rate (repo) by the Reserve Bank of India (RBI), media reports said.
Retail inflation (CPI), a key data for the RBI, has remained above 4 per cent since November 2017. The government has mandated the RBI to restrict the retail inflation at 4 per cent (with a margin of +/- 2 per cent), while supporting growth, reported PTI.
The RBI has refrained from revising the repo rate since August 2017 citing inflationary concerns, the report said.
Indicating hardening of the interest rate scenario, several major lenders including SBI, PNB and ICICI Bank have already raised their lending rates from June 1. Some of the banks have also increased the deposit rates, the report highlighted.
“Notwithstanding the clamour for a rate hike in market, we believe ground realities call for caution and not rate action,” India’s largest lender SBI said in a research report.
One of the reasons it cited was that while the GDP numbers are strong, private consumption continues to lose pace, dropping to 6.6 per cent in 2017-18 from 7.3 per cent in the previous year.
The MPC, headed by RBI Governor Urjit Patel, will for the first time meet for three days as against the usual two.
The resolution of the second bi-monthly monetary policy meeting for the current fiscal will be announced in the afternoon of June 6.