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  4. RBI Monetary Policy: RBI maintains status quo third time in a row, keeps Repo Rate unchanged at 4%

RBI Monetary Policy: RBI maintains status quo third time in a row, keeps Repo Rate unchanged at 4%

Monetary Policy Committee (MPC) voted unanimously to keep the policy repo rate unchanged at 4 per cent and continued with its accommodative stance to support growth. The committee, which has cut rates by 115 basis points since the Covid-19 crisis hit in March, has kept rates on hold since May.

India TV Business Desk Edited by: India TV Business Desk
New Delhi Updated on: December 04, 2020 11:39 IST
RBI Monetary Policy: Governor Shaktikanta Das to announce MPC decisions at 10 am today
Image Source : FILE

RBI Monetary Policy: Governor Shaktikanta Das to announce MPC decisions at 10 am today

The Reserve Bank of India on Friday kept its benchmark policy rate unchanged at 4 per cent as inflation remained above its target even though the economy continued to contract. However, the central bank maintained an accommodative stance, implying more rate cuts in the future if need arises to support the economy hit by the COVID-19 pandemic.

The benchmark repurchase (repo) rate has been left unchanged at 4 per cent, Governor Shaktikanta Das said while announcing the decisions taken by the central bank's Monetary Policy Committee (MPC).

Consequently, the reverse repo rate will also continue to earn 3.35 per cent for banks for their deposits kept with Reserve Bank of India (RBI). The central bank had slashed the repo rate by 115 basis points since late March to support growth.

Addressing the media, RBI Governor Shaktikanta Das said, "Monetary Policy Committee (MPC) was of the view that inflation is likely to remain elevated with some relief in the winter months from prices of perishables and bumper Kharif arrivals."

Monetary Policy Committee (MPC) voted unanimously to keep the policy repo rate unchanged at 4 per cent and continued with its accommodative stance to support growth. The committee, which has cut rates by 115 basis points since the Covid-19 crisis hit in March, has kept rates on hold since May.

"MPC decided to continue with accommodative stands of monetary policy as long as necessary, at least till current financial year & into next year to revive growth on a durable basis & mitigate the impact of COVID-19 while ensuring that inflation remains within target, " RBI Governor added.

The Marginal Standing Facility (MSF) rate and the bank rate remain unchanged at 4.25%. The reverse repo rate remains unchanged at 3.35%,  Shaktikanta Das added.

Das said MPC voted for keeping interest rate unchanged and continued with its accommodative stance to support growth.

The central bank had slashed the repo rate by 115 basis points since late March to support growth.

RBI also told commercial and co-op banks not to declare dividend for FY21. "Commercial Banks will not give out dividends this year and retain all the profits, the governor said, "Das added.

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

Meanwhile,  Reserve Bank of India (RBI) on Friday said it expects the economy to record positive growth in the second half of the current financial year. The economy contracted by 23.9 per cent in the first quarter and 7.5 per cent in the second quarter on account of the COVID-19 pandemic.

"The second half is expected to show some positive growth," RBI Governor Shaktikanta Das said, adding that during the financial year as whole the economy was likely to contract by 7.5 per cent, which is an improvement over its previous projection of 9.5 per cent contraction.

The 26th meeting of the rate-setting MPC with three external members -- Ashima Goyal, Jayanth R Varma and Shashanka Bhide -- began on December 2. This is the second meeting of these members who are appointed for a term of four years.

The government moved the interest rate setting role from the RBI Governor to the six-member MPC in 2016. Half of the panel, headed by the Governor, is made up of external independent members. MPC has been given the mandate to maintain annual inflation at 4 per cent until March 31, 2021, with an upper tolerance of 6 per cent and a lower tolerance of 2 per cent.

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