Reserve Bank of India chief Bimal Jalan reiterated on Monday the bank's soft monetary bias but said there was no immediate plan to cut the short-term repo rate.
His comments came in the wake of market speculation the central bank may lower the 5.5 per cent repo rate, at which the central bank borrows cash from the market, after bond yields sank to record lows.
"The repo rate can be changed as an when required. But as of now there is no proposal," Jalan told reporters after the annual day celebrations of the National Institute of Bank Management.
Repo rate: Repurchase agreements or ready forward deals, a secured short-term -- usually 15-day -- loan by one bank to another against government securities. Legally, the borrower sells the securities to the lending bank for cash, with the stipulation that at the end of the borrowing term it will buy back the securities at a slightly higher price, the difference in price representing the interest.
"The inflation outlook was good despite drought and high oil prices. So the soft monetary bias continues," he added.
Asked if the inflation outlook would help keep interest rates soft, he said: "I don't see it any other way."
He said strong foreign exchange inflows was causing liquidity management problems.
But easy liquidity conditions would enable the market to absorb extra government borrowings, he said.
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