New Delhi: Announcing its bi-monthly monetary policy on Friday, Reserve Bank of India (RBI) kept the repo rate unchanged at 4 per cent on expected lines to support growth hit hard by the pandemic.
Repo rate or repurchase rate is the interest rate at which RBI lends to commercial banks. It is the key tool of the central bank to contain inflation or price rise by regulating the supply of money in the economy.
“Based on the assessment of the evolving domestic and global macroeconomic and financial conditions and outlook, the MPC (Monetary Policy Committee) voted unanimously to keep the policy repo rate unchanged at 4 per cent. The MPC also decided on a 5 to 1 majority to continue with the accommodative stance as long as necessary to revive and sustain growth on a durable basis and continue to mitigate the impact of Covid-19 on the economy while inflation remains within the target going forward,” said RBI Governor Shaktikanta Das who chairs the MPC.
“The Marginal Standing Facility that is MSF rate and the bank rate remain unchanged at 4.25 per cent. The reverse repo rate also remains unchanged at 3.35 per cent,” he added.
While several high-frequency data such as monthly GST collection, vehicle sales and electricity consumption have shown uptrend in the economy, fear of a third wave of the pandemic looms posing downside risks to the growth.
The International Monetary Fund (IMF) last month scaled down India’s growth projection by 300 basis points to 9.5 per cent for the current financial year from 12.5 per cent estimated in April. It attributed the downgrade to ‘lack of access to vaccines’ and possibility of another wave of the deadly Coronavirus.
DK Srivastava, Chief Policy Advisor, EY India told UNI that the economy remains under the influence of Covid and partial lockdowns continue in different parts of the country. He sees the economy recovering fully only after vaccination coverage reaches 70% or so.
“Under the current circumstance, monetary policy may not have much of a role to play in uplifting growth,” he said.