In his first monetary policy review since taking office on September 4, RBI Governor Raghuram Rajan increased the repo rate by 25 basis points to 7.50 per cent.
While the RBI is reportedly thinking of capping loans to real estate, many believe any such move is a bad idea.
The Reserve Bank on Friday upped the cash reserve ratio from 5 per cent to 5.75 per cent, a move expected to flush-out Rs 36,000-crore (Rs 360-billion) from the system.
India Inc is borrowing from global firms as interest rates sky rocket in India.
The Reserve Bank in its first mid-quarter policy review on Monday kept the key interest rates unchanged because of elevated food inflation, rupee depreciation and uncertainty over foreign fund inflows.
Analysts expect modest recovery in Indian economy.
A Reuters poll had forecast retail inflation would slow to 8.35 percent from an annual 8.79 percent in January.
Factory output in June likely rose 5.4 per cent from a year earlier, faster than the 4.7 per cent growth in May, according to a poll of 27 economists.
While the latter is being viewed as a greater concern, the former may gain prominence in the next few weeks.
The central bank has been intervening in the foreign exchange market by buying dollars, and this is capping the rupee's gains.
To neutralise this, RBI has been doing forward swaps
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Growth in India's gross domestic product for the June quarter of 2013-14, as well as for the entire 2014-15, was 4.7%.
This development can strengthen the case for interest rate cut by the RBI.
The repo rate has been unchanged since January, when the RBI increased it by a quarter percentage point.
The RBI expects inflation in 2015 to hover around 6 per cent -- its target for January 2016 -- and sees risks to the target evenly balanced.
The RBI cut rates for third time in 2015 due to favourable economic conditions.
The RBI cited lower-than-expected inflation, weak crude prices and weak demand, as well as the government's commitment to sticking to a fiscal deficit target as reasons.
Benchmark 10-year bond yields hit a 13-month peak as bond traders priced in more aggressive monetary easing next year.