Reserve Bank of India Governor Raghuram Rajan on Tuesday kept the repo rate unchanged at 6.50% in his final policy review after inflation hit a nearly two-year high.
The reverse repo rate under the liquidity adjustment facility (LAF) remains unchanged at 6.0%, and the marginal standing facility (MSF) rate and the Bank Rate at 7.0%.
"It is appropriate for the Reserve Bank to keep the policy repo rate unchanged at this juncture, while awaiting space for policy action. The stance of monetary policy remains accommodative and will continue to emphasise the adequate provision of liquidity," he said in the third bi-monthly review of the monetary policy for the current fiscal.
Rajan said risks to the March 2017 target of 5% for headline inflation - which climbed to a 22-month high of 5.8% in June - "continue to be on upside" on factors like food inflation, services and the effect of the seventh pay panel implementation to government employees.
The decision had been widely expected after consumer inflation accelerated to 5.77% in June, near the top of the Reserve Bank of India's 2-6% range, and above its target of 5% by March 2017.
The former International Monetary Fund chief economist is due to step down on September 4 after a three-year term.
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