The Reserve Bank of India will review its first bi-monthly monetary policy for the new fiscal 2018-19 on Thursday. The policy is likely to keep key repo rates unchanged at six per cent despite an improvement in growth indicators and with inflation surprising on the downside at a time when banks have started raising lending and deposit rates. Headed by RBI Governor Urjit Patel, the Monetary Policy Committee started its two-day meeting on Wednesday.

The recent increased deposit rates and marginal cost based lending rate (MCLR) by many banks has raised the prospects for an across-the-board rise in interest rates.

State Bank of India, India’s largest bank, had last month announced revision in its MCLR by up to 25 bps with effect from March 1. The one-year MCLR rate has been hiked to 8.15 per cent from 7.95 per cent earlier. According to the global financial services major, although India’s economic growth is on an uptrend, recovery remains in an early stage, and this warrants a neutral stance.

“Considering the growth and inflation backdrop relative to the Monetary Policy Committee (MPC’s) assessment, we expect the MPC to remain on hold and maintain its neutral stance,” Morgan Stanley said in a research note.

Lakshmi Iyer, Chief Investment Officer, Kotak Mutual Fund, had told The Indian Express: “The upcoming MPC meeting holds significance in terms of the guidance the RBI has to offer. The general market view is that of an extended pause. The market would also want to see the MPCs reaction to the recent axe in government borrowing programme and its view on the fisc thereof.”