RBI keeps benchmark lending rate unchanged at 7.5%

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The Reserve Bank of India (RBI) left its benchmark lending rate unchanged on Tuesday but kept the door open for further easing.

The central bank kept its main repo rate at 7.5 percent after last month's surprise cut but said it would maintain an accommodative policy stance, Dow Jones reported.

The decision was in line with the expectations of majority of economists polled by Reuters. Just nine of the 40 economists surveyed last week expected a rate cut at this meeting.

Indian stocks edged down 0.3 percent after the RBI decision. The rupee fell 0.2 percent in a knee-jerk reaction against the U.S. dollar.

Read MoreRBA puts off rate cut by another month

While the RBI will no doubt keep an eye on the Federal Reserve's policy path, Governor Raghuram Rajan said the U.S. central bank will not be the key factor in determining future rate moves.

The RBI said it's waiting to see the transmission by banks of past interest rate cuts and for more data points before taking further action on the policy front. It has cut rates twice this year, in January and March, by a total of 50 basis points.

"Developments in sectoral prices, especially those of food, will be monitored, as will the effects of recent weather disturbances and the likely strength of the monsoon, as the Reserve Bank stays vigilant to any threats to the disinflation that is underway," the RBI said in its monetary policy statement.

Upside risks to food inflation, and hence headline inflation, have emerged from unseasonal rains in March, say economists. Initial reports suggest some potential damage to winter crops.

RBI's next steps

Shilan Shah, India economist at Capital Economics says despite the RBI's decision to hold keep rates on hold, the loosening cycle still has some way to run.

"For a start, although it is now forecasting gross domestic product using the new series, the RBI continues to question the picture that series paints of a robust economy," Shah wrote in a note.

"What's more, as we suggested in a note last week, further rate cuts and also some significant capital injections are required to get local banks lending again." he added.

Furthermore, inflation remains below the RBI's 6 percent target for next year.

"Despite the effect of the recent rains, price pressures look set to remain subdued, helped in part by lower oil prices and weak core pressures," he said.

Radhika Rao, an economist at DBS isn't ruling out further easing either.

"We are still looking for one more 25 basis point rate cut by June," she told CNBC.

However, she expects a rate cut will be contingent on the inflation situation. "The RBI will likely wait for March and April inflation data before cutting again. This means there is unlikely to be an inter-meeting cut before June," she said.