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RBI February Monetary Policy: Central bank leaves repo rate unchanged at 4%

Updated : February 05, 2021 12:18 PM IST

The MPC voted unanimously to keep policy rates unchanged.

The Reserve Bank of India's (RBI) Monetary Policy Committee (MPC) kept the repo rate unchanged in the sixth and last bi-monthly monetary policy meet for the financial year 2020-21, governor Shaktikanta Das said on Friday. 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 by the central bank this time. All 10 economists polled by CNBC-TV18 said they didn't expect any rate cut or hike in the February 5 policy as the central bank was expected to remain in a watchful mode.

The MSF rate and bank rate remain unchanged at 4.25 percent.

The governor said that the inflation has eased below 6 percent for the first time since the pandemic and the outlook for growth has improved significantly.

The MPC is of the view that the need of the hour is to continue to support growth even as signs of recovery strengthen. FPI, FDI investments have surged in recent months, indicative of their faith in the economy, said Das. "List of normalising sectors is expanding," he said.

According to him, consumer confidence is reviving and business expectations remain upbeat. Manufacturing, services and composite PMI are in expansionary zones, he said.

The GDP growth for FY22 is projected at 10.5 percent. The growth is seen at 26.2-8.3 percent in H1FY22 and 6 percent in Q3 of FY22.

On inflation, Das said that vegetable prices are expected to remain soft in the near term while pressure is expected to persist in certain food items.

The core inflation outlook is influenced by cost-push pressure seen in recent months, said the central bank governor.

CPI inflation is seen at 5.2 percent for Q4 FY21 vs 5.8 percent forecast earlier. It is seen at 5.2-5 percent for H1 FY22 against 5.2-4.6 percent forecast earlier. CPI inflation is seen at 4.3 percent in Q3 FY22.

"RBI has proactively taken steps to insulate domestic financial markets from global spillovers," said Das.

Among the important announcements made are a two-phase normalisation for CRR, NBFCs being included in the TLTRO on-tap scheme, allowing retail investors to open guilt accounts with RBI to encourage participation in GSec market, and integration of three ombudsman schemes into one to make grievance redressal easier.

Follow our live blog on the RBI monetary policy here

Published : February 05, 2021 10:06 AM IST

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