Despite rise in interest rates in the first half, Reserve Bank of India on Tuesday kept its bank rate unchanged and said it will provide an environment (interest rate) conducive to price stability and macroeconomic growth.

The financial markets have remained stable though the interest rates have shown upward movement, particularly at the longer end, RBI said in the mid-term review of its annual policy for 2004-05.

Highlights of Monetary and Credit Policy
RBI keeps bank rate untouched at 6%
RBI cuts growth estimates to 6.5%

The spread between 10-year government paper and one year bonds moved from 0.63 per cent to 1.21 per cent and the average call money rate rose from 4.29 per cent to 4.57 per cent in the period under review, RBI said.

The yield on government securities with 10-year residual maturity rose to 6.72 per cent from 5.14 per cent and that of 20-year was up at 7.16 per cent to 5.76 per cent, RBI added.

Elaborating on the its stance on monetary policy for the second half, RBI governor Y V Reddy said based on the review of macroeconomic developments, it is desirable to leave the bank rate untouched at six per cent.

Considering the overall monetary conditions, the fixed repo rate would be raised by 0.25 per cent to 4.75 per cent under the liquidity adjustment facility from Wednesday.