UPDATE 2-India cbank unexpectedly keeps rates unchanged as cash crunch roils economy

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By Suvashree Choudhury and Rafael Nam
| MUMBAI

MUMBAI India’s central bank unexpectedly kept its key policy rate unchanged at 6.25 percent on Wednesday, despite calls for action in the face of an intense cash shortage that threatens to slam the brakes on the world’s fastest-growing large economy.

The Reserve Bank of India’s (RBI) monetary policy committee voted 6-0 to leave the repo rate INREPO=ECI unchanged, saying it needed more time to assess if the recent cash squeeze would cause more lasting damage to the economy.

Pressure on the central bank and its governor, Urjit Patel, to act has grown since Prime Minister Narendra Modi stunned the country on Nov. 8 by abolishing 500- and 1,000-rupee notes ($7.35-$14.70), removing 86 percent of the currency in circulation in a bid to crack down on the “shadow economy”.

While shortages of new bank notes are still…

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