The Reserve Bank of India (RBI) kept its key policy rates unchanged on Friday, for the sixth consecutive time and at record lows, as it continued with its “accommodative stance to revive and sustain growth on sustainable basis” amid the second wave of the coronavirus pandemic. “The Monetary Policy Committee (MPC) voted to maintain status quo ie repo rate remains unchanged at 4%. MCC also decided to continue with accommodative stance as long as necessary to revive and sustain growth on durable basis and to mitigate impact of Covid on economy,” RBI governor Shaktikanta Das said in Mumbai after MPC’s three-day meeting.
“The MPC was of the view that at this juncture policy support from all sides is required to gain the momentum of growth that was evident in the second half of 2021 and to nurture the recovery after it has taken root,” Das said.
Das added that the RBI kept the reverse repo rate, or borrowing rate, at 3.35 percent. Due to the impact of the second wave of the coronavirus pandemic, the central bank lowered its forecast for economic growth for the current fiscal year to 9.5 percent from a previous projection of 10.5 percent. He also stated that the Marginal Standing Facility (MSF) rate and bank rates were both kept at 4.25 percent.
Since March 2020, the RBI has cut the repo rate, or key lending rate, by a total of 115 basis points (bps) to cushion the blow of the coronavirus pandemic. On June 1, the MPC, the RBI’s rate-setting panel, began its three-day monetary policy deliberations.
On May 22, 2020, the central bank cut its policy rate to a historic low in an off-policy cycle to boost demand.
The RBI’s annual report, released last month, said that “the conduct of monetary policy in 2021-22 would be guided by evolving macroeconomic conditions, with a bias to remain supportive of growth till it gains traction on a durable basis while ensuring that inflation remains within the target”.
The central bank would also ensure that system-level liquidity remains comfortable during 2021-22, in line with the stance of monetary policy, and that monetary transmission continues unhindered while financial stability is maintained, according to the report.
The Indian economy grew by 1.6 percent in the first quarter of this year compared to the same period last year, but contracted by 7.3 percent for the entire fiscal year, the worst in more than 40 years.
