Tuesday's scheduled review, coming after the first full budget presented by finance minister Arun Jaitley proposing changes in the RBI Act, follows two previous unscheduled rate cuts since January which brought the repo rate down from 8 per cent by 50 basis points to the existing one. The interest rate cuts this year came after nearly two years.

Announcing the rate cut in January, RBI governor Raghuram Rajan had said: "The key to further easing are data that confirm continuing disinflationary pressures and sustained high quality fiscal consolidation."

The consumer price index (CPI)-based inflation rose to 5.37 per cent for February, from 5.19 per cent in January and 4.28 per cent in December 2014.

Moreover, Jaitley has extended the target deadline for controlling fiscal deficit to three per cent, reasoning that insistence on a timetable to contain the deficit would harm growth prospects.

In his budget, the finance minister announced that the government would sign the Monetary Policy Framework Agreement with the RBI for controlling inflation, which will become a law providing for a monetary policy committee.

With these major changes in the RBI, the monetary policy committee will reduce the governor's power to act alone.

The government has also proposed to amend the RBI Act to take away money market regulatory powers from the central bank and bring it under the purview of the market regulator, Securities and Exchange Board of India (Sebi).

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