keep the cash reserve ratio (CRR) of scheduled banks unchanged at 4.0 per cent of net demand and time liability.
The RBI Governor, Raghuram Rajan, however, warned that there would be action taken outside of the policy announcement if food prices spiral out of control again.
"The policy decision is a close one. Current inflation is too high," said the RBI in its policy statement. However, the RBI also cited its reluctance to over-react given the "wide bands of uncertainty" surrounding the outlook for inflation amid signs of sharply falling vegetable prices and "the weak state of the economy."
"High inflation at both wholesale and retail levels risks entrenching inflation expectations at unacceptably elevated levels, posing a threat to growth and financial stability," the report stated.
Also Read: RBI rates: What they really mean
The repo rate is the rate banks pay when they borrow money from the central bank to meet their short term fund requirements. Reverse repo rate is the interest rate that the RBI pays to commercial banks when they keep their surplus short term funds with the central bank.
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The RBI added it would gauge the impact of any decision by the U.S. Federal Reserve to withdraw its monetary stimulus. The U.S. central bank concludes its policy meeting later in the day.
The RBI had raised interest rates by a quarter percentage point at its previous reviews in September and October. No review was held in November.