RBI keeps repo rate at 4%; pegs GDP growth at 10.5%

India’s apex monetary institution, the Reserve Bank of India, 0n Wednesday decided to keep key lending rates unchanged for the fifth consecutive time while retaining the country’s economic growth at 10.5 per cent.

In its April policy review meeting, RBI’s six-member monetary policy committee (MPC), headed by governor Shaktikanta Das retained repo rate at four per cent and reverse repo rate at 3.35 per cent.

Repo rate is the rate at which the RBI lends to banks, while reverse repo rate is the rate at which it borrows from banks.

The Marginal Standing Facility (MSF) rate and the bank rate remain also unchanged at 4.25 per cent.

“The RBI also unanimously decided to continue with the accommodative stance as long as necessary to sustain growth on a durable basis and continue to mitigate the impact of Covid-19 on the economy, while ensuring that inflation remains within the target going forward,” Das said.

"The MPC judged that monetary policy should remain accommodative till prospects of sustained recovery are well secured," RBI governor Shaktikanta Das said.

RBI had last revised its policy rate on May 22, 2020 in an off-policy cycle to perk up demand by cutting interest rate to a historic low.

He said the RBI would continue to do whatever it takes to preserve financial stability and to insulate domestic financial markets from global spillovers and the consequent volatility.

To provide additional liquidity to states, RBI has decided to accept the recommendations of an Advisory Committee constituted by it to review the Ways and Means Advance (WMA) limits for State Governments/UTs and other related issues.

Accordingly, it has been decided to enhance the aggregate WMA limit of states and UTs to Rs470.1 billion, an increase of about 46 per cent from the current limit of Rs 322.25 billion which was fixed in February 2016.

To nurture the still nascent growth impulses, the central bank felt necessary to support continued flow of credit to the real economy. Accordingly, liquidity support of Rs500 billion for fresh lending during 2021-22 will be provided to All India Financial Institutions.

— issacjohn@khaleejtimes.com