Home loan rates are likely to remain unchanged for a while stated The Reserve Bank of India (RBI). As widely expected it kept interest rates unchanged, but raised concerns over fiscal slippages in view of a rush for farm loan waivers.

The fifth meeting of the Monetary Policy Committee (MPC) maintained the repo rate at 6.25 percent at which it lends to banks, and the reverse repo, at 6 percent at which it borrows.

The RBI, however, slashed the Statutory Liquidity Ratio (SLR), or the percentage of deposits that banks have to park in government securities, by 0.5 percent to 20 percent, in a move that would result in increase of lending by banks.

The current state of the economy underscores the need to revive private investment, restore banking sector and health and remove infrastructural bottlenecks. Monetary policy can play a more effective role only when these factors are in place.

The central bank, however, raised concerns over the possibility of fiscal slippages due to the farm loan waivers. The risk of fiscal slippages, which, by and large, can entail inflationary spillovers, has risen with the announcements of large farm loan waivers. The RBI also cut the economic growth projection to 7.3 percent for the current fiscal, from 7.4 percent earlier.

By: shailaja K