The Reserve Bank of India's (RBI) Monetary Policy Committee (MPC) kept the repo rate unchanged in the first bi-monthly monetary policy meet for the financial year 2021-22, governor Shaktikanta Das said on Wednesday. With no change this time as well, the repo rate currently stands at 4 percent. The reverse repo rate has been maintained at 3.35 percent.
The MPC voted unanimously to keep policy rates unchanged.
The central bank has maintained its policy stance at “accommodative” which could continue for as long as necessary to revive growth.
The repo rate is the rate at which the central bank of the country lends funds to the commercial banks. Commercial banks borrow funds only if they witness a shortfall in their funds. The monetary policy committee of a country uses the reverse repo rate as a tool to control the money supply in the country.
The announcement is in line with the Street's expectations as it was expecting a status quo as the central bank is stuck between the elevated inflation and surging coronavirus cases.
The MSF rate and bank rate remain unchanged at 4.25 percent.
Das said that the global growth is gradually recovering but is still uneven. The focus of the budget on investment-led measures, PLI schemes, will reinforce economic revival, said the governor.
According to the central bank, economic activity is normalising in spite of the surge in infections, urban demand has gained traction and should get fillip from the ongoing vaccination drive.
However, there is concern around rising cases of infections, said Das, as the recent surge adds to the uncertainty in growth rates.
Real GDP growth for FY22 is retained at 10.5 percent while the RBI sees Q1 real GDP growth at 22.6 percent. It estimates 8.3 percent growth in Q2 FY22, 5.4 percent in Q3 FY22, and 6.2 percent in Q4 FY22.
The retail inflation for Q1 and Q2 is seen at 5.2 vs 5.2-5 percent earlier while for Q3, it is seen at 4.4 percent vs 4.3 percent earlier. It said food inflation will depend on factors such as South West monsoon, domestic taxes on petroleum products, etc.
The RBI today also announced secondary market Gsec acquisition program 1.0. Das said that the secondary market G-Sec acquisition program for Rs 1 lakh crore will be put in place for Q1 of FY22, where the first purchase of Rs 25,000 crore will be done on April 15 under G-SAP.
"RBI will commit to upfront buying of G-secs. It will ensure financial stability and G-sec stability from global uncertainty," Das said.
Among other other important announcements are liquidity support of Rs 50,000 crore for fresh lending in 2021, extension of TLTRO on-tap scheme, formation of a committee to study working of ARCs, proposal to construct and release a financial inclusion index, extension of RTGS and NEFT to prepaid payment instruments (PPI), white-label ATMS, among others.
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