The key short-term lending rate (repo rate)has been hiked by 0.25 pc to 7.50 pc.
The Reserve Bank of India has kept the key short term lending rate (repo rate) unchanged at 7.25%.
Raghuram Rajan, who was Chief Economic Advisor in the Finance Ministry before taking over as RBI Governor on September 4, is scheduled to announce the next mid-quarter policy review on December 18.
Weighed down by a weak rupee, the Reserve Bank on Tuesday chose to keep all key interest rates unchanged and asked the government to take urgent steps to reign in the high current account deficit.
The Reserve Bank of India hiked key interest rates by 0.25 per cent each in the last two reviews to tame inflation.
Of the 15 participants, 7 expect CRR cut, only one sees repo rate reduction.
Due to tight liquidity condition, RBI would cut cash reserve ratio.
The Reserve Bank will present the mid-quarter Monetary Policy Review on Tuesday.
The central bank will appear vacuous if it holds fire next week following its ultra hawkish guidance at the last monetary policy review.
RBI Governor Raghuram Rajan on Friday said repo rate has been hiked as inflation pressures remain high.
RBI expected to draw comfort from stable core inflation.
Last month, rupee had emerged as the worst performing currency across the globe on a monthly basis.
In the mid-quarter review on December 18, the Reserve Bank left key policy rates unchanged but said it will hike interest rates if inflation does not subside.
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Raghuram Rajan, who took over as RBI Governor on September 4, is scheduled to unveil on Friday mid-quarter monetary policy review, an event keenly awaited by industry and banks.
Costlier onion and other vegetables pushed up inflation for the third month in a row to 6.1 per cent in August, making it difficult for the RBI to cut rate in the monetary policy review due later this week.
According to report by Dun and Bradstreet, central bank expected to maintain status quo on policy rate.
The term of Subbarao as RBI chief ends on September 4, while the next mid-quarter policy review is due on September 18.
Financial services firm AnandRathi analysed the key points of the policy soon after it was announced.
The 30-share Sensex provisionally ended at 15,485.40 down 351.07 points or 2.2% and the 50-share Nifty ended at 4,646.35 down 100 points or 2.1%.
Mukherjee said it was not necessary for the RBI governor to consult him before the mid-quarterly review of the credit policy.
The status quo decision came as a breather as only last week the RBI had pulled up banks for not helping it in monetary policy transmission.
Some accounts can be revived by rescheduling loans, which the RBI envisages to do once the norms get finalised after the public discussion.
Since January 1, the rupee value has fallen by 5.5 per cent against the US dollar and touched life-time low of 58.98 on Tuesday.
In the mid-quarter monetary policy review last month, RBI Governor Raghuram Rajan had left the key policy rate unchanged, after raising it 50 bps in two instalments since he took over on September 4, saying he was waiting for more data clarity.
Ahead of its mid-quarterly policy review, the Reserve Bank today hinted at cut in interest rates, saying moderation in inflation due to lower economic growth and cooling global oil prices provide room for easing monetary policy.
RBI is likely to continue with its tight monetary policy.
Banking shares are down up to 11% after the Reserve Bank of India has increased the policy repo rate by 25 basis points from 7.25% to 7.5% with immediate effect.
The Reserve Bank on Monday reduced the marginal standing facility (MSF) rate, at which banks borrow from it, to 9 per cent from 9.5 per cent to improve liquidity in the system.
Recent slide in inflation no consolation amid exceptional shrinkage in industrial growth.
The Reserve Bank on Monday pitched for creation of a conducive environment for investment and faster clearances of projects to boost economic growth which slowed to a decade low of 5 per cent in the previous fiscal.
The new rates would be effective from Friday.
The Fed's decision on tapering its monthly $85 billion bond-buying programme is expected later on Wednesday.
The RBI has been tightening key benchmark rates since November last year as the country started recovering from the impact of the global economic slowdown.
The central bank has clearly signalled the conditions under which monetary easing would take place early this quarter. And, current conditions meets the RBI's paramters
The government has hiked import duty on gold three times in a year and recently raised it by 2 per cent to 8 per cent to curb demand.
Rajan said it was important that the government and the RBI be vigilant to the growth scenario.
India's economic growth rate is expected to be at least 6 per cent in the 2013-14 fiscal, Prime Minister's Economic Advisory Council (PMEAC) Chairman C Rangarajan said.
RBI is scheduled to announce mid-quarter review of monetary policy for 2013-14 on June 17.
Analysts expect RBI to restore 100-bp corridor in Tuesday's policy review.
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