Mumbai: The Reserve Bank of India (RBI) has decided to keep its interest rates unchanged for the seventh straight time in its latest Monetary Policy Committee (MPC) on Friday.
RBI has kept its projection for the real GDP growth retained at 9.5 per cents for 2021-22, said RBI Governor Shaktikanta Das. He added that there is optimism in the economy as the Covid wave ebbs. He added that the country and RBI will be able to tide over the third wave if it occurs. However, the recovery remains uneven across sectors.
As for inflation, the RBI has kept the CPI inflation projections at 5.7 per cent during 2021-22 – this consists of 5.9 per cent in Q2, 5.3 per cent in Q3 and 5.8 per cent in Q4 of 2021-22 with risks broadly balanced. CPI inflation for the first quarter of 2022-23 is projected at 5.1 percent, RBI Governor Shaktikanta Das said.
The apex bank on Friday also continued to keep the repo rate unchanged for the seventh time straight in line with its accommodative stance, citing the need to support ongoing growth recovery amid continued uncertainty and global financial market volatility.
The announcement came after a three-day meeting of its Monetary Policy Committee (MPC). The central bank has cut policy rates by 115 basis points since February 2020. The repo rate — the central bank’s lending rate — remains unchanged at 4 per cent and reverse repo rate — borrowing rate — at 3.35 per cent.
“Economic activity has broadly evolved along the lines of the Monetary Policy Committee’s expectations in June and the economy is recovering from the setback of the second phase of Covid-19,” Das said.
Das added MPC voted unanimously for keeping interest rate unchanged and decided to continue with its accommodative stance as long as necessary to support growth and keep inflation within the target.
Reserve Bank plans to go ahead with variable rate reverse repo (VRRR) auctions as its main liquidity operation. “With the commencement of normal liquidity operations, the VRRR, which was temporarily held in abeyance during the pandemic, has been re-introduced since January 15, 2021,” Das said.
RBI has now been decided to conduct fortnightly VRRR auctions of Rs 2.5 lakh crore on August 13, 2021; Rs 3.0 lakh crore on August 27, 2021; Rs 3.5 lakh crore on September 9, 2021; and Rs 4.0 lakh crore on September 24, 2021.
“These enhanced VRRR auctions should not be misread as a reversal of the accommodative policy stance, as the amount absorbed under the fixed rate reverse repo is expected to remain more than ₹4.0 lakh crore at end September 2021,” Das explained.
(with inputs from ANI)