MUMBAI: As the Reserve Bank of India (RBI) prepares for its bi-monthly monetary policy update here, uncertainty remains over Governor Raghuram Rajan cutting interest rates, despite requests to do so from stakeholders -- right from the government to corporates.

Rajan has twice cut the repo rate, at which RBI lends to commercial banks, over two unscheduled monetary policy reviews in January and March, bringing it down to the current 7.50%.

On the other hand, the scheduled reviews in February and April passed without any changes. He kept interest rates on hold at 7.5% in April, saying he was waiting for banks to pass on the previous rate cuts - and dismissed bankers' claims that the cost of funds remained too high.

Rajan also said the government's "fiscal consolidation programme, while delayed, may compensate in quality, especially if state governments are cooperative". Announcing the rate cut in January, he had said that "the key to further easing are data that confirm continuing disinflationary pressures and sustained high-quality fiscal consolidation".

Finance Minister Arun Jaitley had in his first full budget in February extended the target deadline for controlling fiscal deficit to three%, reasoning that insistence on a timetable to contain this would harm growth prospects. The targets for the next three years have been set at 3.9% for 2015-16, 3.5% for 2016-17 and 3.0% for 2017-18.

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