RBI Monetary Policy Review: Repo rate remains unchanged at 4%

Reserve Bank of India

In its scheduled meeting that started from June 2, the Reserve Bank of India (RBI)’s Monetary Policy Committee (MPC) kept key policy rates unchanged citing the ongoing challenges on the economic scenario due to the covid-19 outbreak, that has now entered the second wave.

As announced by RBI Governor Shaktikanta Das announced the repo rate is unchanged at 4 percent and reverse repo rate at 3.35 percent,.

“MPC has decided to continue with accommodative stance until necessary to mitigate impact of COPVID-19,”said Das.

Further, the central bank also brought down GDP growth forecast for FY22 to 9.5 percent as compared to10.5 percent announced earlier.

The RBI’s action is in sync with the projections of economists indicating a status-quo in rates.

Today, the RBI Governor said that drop in urban demand and the continued spread of COVID-19 in rural areas is likely to impact the GDP growth negatively.

Besides, the RBI had slashed the key policy rate by 250 basis points since February 2019.

In the previous policy review, the RBI had indicated concerns stating that the lockdowns triggered by the second wave of COVID-19 cases is likely to hit the growth recovery.

“The renewed jump in COVID-19 infections in certain parts of the country and the associated localised lockdowns could dampen the demand for contact-intensive services, restrain growth impulses and prolong the return to normalcy,” said Das during the RBI policy review meet.

He added “In such an environment, continued policy support remains necessary.”

The MPC will be meeting next on August 4-6, 2021.

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