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Monetary policy: RBI keeps interest rates unchanged for 7th time in a row; repo retained at 4%

RBI Monetary Policy Review: RBI keeps interest rates unchanged at 4 per cent.

India TV Business Desk India TV Business Desk
New Delhi Updated on: August 06, 2021 11:46 IST
RBI monetary policy
Image Source : PTI (FILE)

RBI to announce its bi-monthly monetary policy review today

The Reserve Bank of India (RBI) on Friday decided to keep benchmark interest rate unchanged at 4 per cent but maintained an accommodative stance as the economy is yet to recover from the impact of second COVID wave.

This is the seventh time in a row that the Monetary Policy Committee (MPC) headed by RBI Governor Shaktikanta Das has maintained status quo. RBI had last revised its policy rate on May 22, 2020, in an off-policy cycle to perk up demand by cutting interest rate to a historic low. 

MPC decided to maintain status quo, that is keeping benchmark repurchase (repo) rate at 4 per cent, Das said while announcing the bi-monthly monetary policy review. Consequently, the reverse repo rate will also continue to earn 3.35 per cent for banks for their deposits kept with RBI.

Das said MPC voted unanimously for keeping interest rate unchanged and decided to continue with its accommodative stance as long as necessary to support growth and keep inflation within the target.

The MPC has been given the mandate to maintain annual inflation at 4 per cent until March 31, 2026, with an upper tolerance of 6 per cent and a lower tolerance of 2 per cent. 

Observing that economy is slowly recovery from brief hiatus, the Governor said, some of the high frequency indicators reflect recovery.

Meanwhile, the Monetary Policy Committee (MPC), which decides on key interest rates, will meet six times during the next financial year, the RBI has said. Half of the committee, which is headed by RBI Governor Shaktikanta Das, is made up of external independent members.

While the first two meetings of the six-member MPC took place in April and June, the three-day third meeting was held between August 4 and 6. The remaining will take place in October (6 to 8); December (6 to 8) and February (7 to 9, 2022).

The government moved the interest rate-setting role from the RBI governor to the six-member MPC in 2016. As per the Reserve Bank of India Act, 1934, the central bank is required to organise at least four meetings of the MPC in a year.

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