Reserve Bank of India (RBI) chief Duvvuri Subbarao overruled the advice of a majority of external panel members by keeping the repo rate steady at the monetary policy review in January, minutes of the technical advisory panel meeting showed.
The committee consists of seven external members, apart from the governor and the four deputy governors. According to the minutes released on Friday, four of the external members suggested a cut in the repo rate.
“Some members felt that the slowdown in investment would affect the next year’s growth as well. Besides, it would also have implications for inflation, going forward,” the minutes said.
The 12-member panel, which meets before every quarterly monetary policy review, is advisory in nature and has no voting powers.
The panel met on January 18 in the run-up to the third quarter policy review.
Subbarao has acted against the view of a majority of his advisors for the fourth time, according to records available since the central bank started releasing the minutes.
He increased rates by more than suggested when inflation was high over the past two years and has desisted from cutting rates now, citing continued inflationary pressures.
Among the external members, three suggested a 25 basis points cut in the key interest rate, while the fourth advocated a bigger 50 basis points cut.
The RBI chief, who has the final say in deciding rates, left policy rates unchanged on Jan. 24 at 8.5%, but cut banks’ cash reserve ratio by 50 basis points to 5.5% to infuse liquidity into a cash-starved banking system.
Among the members who had pitched for rate cuts, one suggested the cash reserve ratio be cut by 50 basis points, while another member was for a 25 basis points cut.
The central bank started releasing the minutes of its quarterly technical advisory committee meeting from February 2011.