RBI Governor Raghuram Rajan went with external committee in December policy review

MUMBAI: Reserve Bank of India ( RBI) governor Raghuram Rajan went with the majority view of the external members in its technical advisory committee (TAC) on monetary policy when he maintained status quo on interest rates, a summary of the pre policy consultation released by the central bank on Tuesday showed.

Four of five members recommended that the RBI keep its benchmark rate unchanged citing a rise in consumer price inflation, neutral real policy rate and also because major central banks around the globe were at the cusp of a change in monetary policy.

The RBI kept its key policy rate or repo rate unchanged at 6.75% in its policy review on December 1, after cutting it by a sharper than expected 50 basis points in September. One basis point is 0.01 percentage point.

The consultations for this policy were held via email between November 20 and 24.

Five external members in the RBI advisory committee are Shankar Acharya, Arvind Virmani, Errol D’Souza, Ashima Goyal, and Prof. Chetan Ghate. Only one of the five members recommended a rate cut by 25 basis points since CPI inflation was low. This member assumed that government will meet its fiscal and revenue deficit targets in 2016-17, RBI said.