India's central bank kept its key interest rate unchanged on Wednesday, defying expectations for a modest reduction in the aftermath of the currency demonetization shock.
The Monetary Policy Committee of Reserve Bank of India headed by Urjit Patel unanimously decided to hold the key repo rate at 6.25 percent and reverse repo rate at 5.75 percent.
Economists had widely expected 25 basis point reduction in key rates. The repo rate was last reduced by a quarter point in October.
The bank lowered its growth outlook for 2016-17 to 7.1 percent from 7.6 percent.
The RBI today withdrew the incremental cash reserve ratio, which the bank had announced on November 26 to absorb excess liquidity in the system following the demonetization.
The liquidity released due to the discontinuation of the incremental CRR would be absorbed by a mix of market stabilization scheme and liquidity adjustment facility operations, the bank said.
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