New Delhi, June 19 -- The rate-setting panel of India's central bank decided to keep interest rates on hold on the back of uncertainty over the West Asia conflict, with governor Sanjay Malhotra saying he prefers a "wait and watch" approach.

"We should remain watchful and wary about the generalization of inflation in the coming months," Malhotra wrote in the minutes published on Friday. "Going forward, revision in retail prices of petrol and diesel in May would lead to higher fuel inflation in the coming months."

At its 3-5 June meeting, the Monetary Policy Committee kept the key repo rate unchanged at 5.25%, while acknowledging that there were considerable risks to its assessments of inflation and growth. These emanate from the inabilit...