MUMBAI: The Reserve Bank of India on Tuesday made it clear that it will cut interest rates further only if it sees more robust containment of prices and commercial banks lowering the cost of housing, auto and corporate loans.

RBI Governor Raghuram Rajan, who conducted the first bi-monthly review of the monetary policy for the current fiscal year, decided to retain the repurchase rate, the reverse repurchase rate, the cash reserve ratio and the statutory ratio at existing levels.

He also projected a 7.8 percent growth for the current fiscal year, subject to a normal monsoon - over which the RBI was worried - as also an inflation rate of 5.8 percent by the end of the year, after easing to around 4 percent by August.

Rajan said the Reserve Bank adopted an accommodative policy stance since January, ensuring comfortable liquidity in the system. "Going forward, the accommodative stance of monetary policy will be maintained, but monetary policy actions will be conditioned by incoming data."

"For monetary transmission to occur, lending rates have to be sensitive to the policy rate," Rajan said, expressing confidence that the Indian economy will rebound, notably in the manufacturing sector, while also nudging commercial banks to play their part.

"The outlook for growth is improving gradually. Comfortable liquidity conditions should enable banks to transmit the recent reductions in the policy rate into their lending rates, thereby improving financing conditions for the productive sectors of the economy."

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