RBI keeps repo rate untouched at 4 per cent

Reserve Bank of India (RBI) has kept the policy repo rate under the liquidity adjustment facility (LAF) unchanged at 4.0 per cent. Consequently, the reverse repo rate under the LAF remains unchanged at 3.35 per cent along with, the marginal standing facility (MSF) rate as well as the bank rate at 4.25 per cent each.

The monetary policy committee (MPC) of RBI also decided to continue with the accommodative stance as long as necessary, at least during the current financial year and also, into the next financial year to revive growth on a durable basis and mitigate the impact of COVID-19 on the economy, while ensuring that inflation remains within the target, going forward. These decisions are in consonance with the objective of achieving the medium-term target for consumer price index (CPI) inflation of 4 per cent within a band of +/- 2 per cent, while supporting growth.

On the economic growth front, RBI said that the real gross domestic product (GDP) growth in 2020-21 is expected to be negative at (-) 9.5 per cent, with risks tilted to the downside: (-) 9.8 per cent in Q2FY21; (-) 5.6 per cent in Q3; and 0.5 per cent in Q4. Real GDP growth for Q1FY22 is placed at 20.6 per cent. On the inflation front, CPI inflation is projected at 6.8 per cent for Q2FY21, at 5.4-4.5 per cent for H2FY21 and 4.3 per cent for Q1FY22, with risks, broadly balanced.