RBI keeps interest rates on hold as Covid-19 cases surge

Central bank retained GDP growth projection at 10.5 per cent in the financial year 2021-22

Mumbai: The Reserve Bank of India (RBI) on Wednesday kept key interest rates on hold and maintained an accommodative policy stance to nurture a fragile economic recovery amid a sharp new wave of Covid-19 cases.

“The recent surge in Covid-19 infections has created uncertainty over economic growth recovery. The central bank will remain accommodative as long as necessary to sustain growth on a durable basis,” said RBI Governor Shaktikanta Das after the three-day meeting of its six-member monetary policy committee (MPC).

The repo rate and reverse repo rate thus remain unchanged at 4 per cent and 3.35 per cent respectively.

Repo is the rate at which RBI lends funds to commercial banks when needed. It is a tool that the central bank uses to control inflation. Reverse repo rate is the rate at which the RBI borrows from banks.

The RBI retained GDP growth projection at 10.5 per cent in the financial year 2021-22. At the same time, it revised projection for CPI-based inflation to 5.2 per cent in Q1 and Q2 of FY22, 5.3 per cent in Q3 and 5.1 per cent in Q4.

“The rural demand remains resilient, urban demand is gaining traction and should pick up further with a pick-up in vaccination drive,” said Das. “The global economy is showing some recovery but the path remains uncertain.”

India’s focus should be on containing fresh infection spread and economic revival, he added. The RBI will ensure the orderly conduct of government borrowing and preserve financial stability, said Das.

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