The Reserve Bank of India on Wednesday kept key interest rates unchanged and maintained an accommodative stance in the wake of rising Covid-19 cases in the country.
The central bank’s Monetary Policy Committee (MPC) kept the repo rate unchanged at 4 per cent, while the reverse repo rate has been maintained at 3.35 per cent. The MPC unanimously voted to keep the key interest rates unchanged. The decision is in line with what economists had predicted earlier.
RBI Monetary Policy 2021 Highlights, Reserve Bank of India Governor Statement.
- RBI maintains status quo fifth time in a row on policy rate as the central bank keeps repo unchanged at 4 per cent.
- Reserve Bank of India will maintain accommodative monetary policy stance to support growth, keep inflation at targeted level, said Shaktikanta Das, RBI Governor.
- Recent surge in COVID-19 infections has created uncertainty over economic growth recovery, says RBI Governor Shaktikanta Das.
- The RBI Governor said that focus must be on containing spread of virus and economic recovery.
- Meanwhile, RBI has retained economic growth for 2021-22 fiscal at 10.5 per cent in 2021-22 fiscal’s first monetary policy.
- RBI will ensure ample liquidity in system so that productive sector gets adequate credit, said Das.
- Reserve Bank of India will ensure orderly conduct of government borrowing and preserve financial stability, said Governor Das.
- RBI will continue to do whatever it takes to preserve stability and to insulate financial firms from global spillovers, the Reserve Bank of India Governor said.
- RBI has announced Rs 50,000 crore additional liquidity facility to NABARD, NHB and SIDBI for fresh lending during the FY 2021-22.
- The Reserve Bank of India has enhanced aggregate ways and means advances limits to states to Rs 47,010 crore.
The central bank mainly factors in the retail inflation based on Consumer Price Index while arriving at its monetary policy. The Repo rate is an indicator of the rate at which commercial banks borrow money by selling their securities to the Reserve Bank of India (RBI) in order to maintain liquidity. Repo rate is basically one of the key tools of RBI to keep inflation under control. On February 5, after the last MPC meet, the central bank had kept the key interest rate (repo) unchanged citing inflationary concerns.
Earlier, Governor Shaktikanta Das-headed rate-setting panel MPC started its three-day deliberation on the next monetary policy on Monday amid sudden surge in COVID-19 cases and the government’s recent mandate asking the central bank to keep retail inflation around 4 per cent. Experts were also of the view that the Reserve Bank will maintain status quo on policy rates at its first bi-monthly monetary policy review for the current fiscal. It is also likely to maintain an accommodative policy stance.
In a bid to control price rise, the government in 2016 had given a mandate to RBI to keep the retail inflation at 4 per cent with a margin of 2 per cent on either side for a five-year period ending March 31, 2021.