Mumbai, Jun 3 (KNN)  There would be no change in the interest rates with the result that the cost of borrowing will remain high while the Reserve Bank of India has reduced the Statutory Liquidity Ratio (SLR) , meaning thereby the banks will have some more resources to lend to the private sector as they will have to park less of their funds in the specified government securities. Life for the industry, both small and big will not change for better.

Governor Raghuram Rajan kept the key policy rate, known as Repo rate in the banking parlance, unchanged at 8 per cent but reduced the mandatory amount of securities in which the banks park their funds. The ratio is cut by 0. 50 percentage points to 22.5 per cent of deposits, starting in mid-June. But experts feel, it would not make much of a difference, since it is not the liquidity which is the issue, but the cost of borrowing that is pinching the borrowers.

"If the economy stays on this course, further policy tightening will not be warranted," Rajan said referring to the moderating inflation trend. But then, fighting inflation remains the number one priority of the central bank even though the economic growth stays at sub five per cent, the lowest in 25 years.

Rajan said the RBI “remains committed to keeping the economy on a disinflationary course, taking CPI inflation to 8 per cent by January 2015 and 6 per cent by January 2016. If the economy stays on this course, further policy tightening will not be warranted. On the other hand, if disinflation, adjusting for base effects, is faster than currently anticipated, it will provide headroom for an easing of the policy stance.”  (KNN/PC)