Reserve Bank of India (RBI) opted for a status quo and left interest rates unchanged, but maintained an accommodative stance, implying more rate cuts in future if the need arises to support the economy hit by the COVID-19 crisis.
The benchmark repurchase (repo) rate has been left unchanged at 4 per cent, while addressing media RBI 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 parked deposits kept with the RBI. He said the MPC voted for keeping interest rate unchanged and continued with its accommodative stance to support growth. RBI had last revised its policy rate on May 22, in an off-policy cycle to perk up demand by cutting interest rate to historic low.
“Accommodative stance of the monetary policy will continue as long as necessary to revive growth and mitigate the impact of COVID19 pandemic while ensuring that inflation remains within target going forward,” said RBI Governor Shaktikanta Das.
“RBI is perhaps the only central bank in the world which has set up a special quarantine facility for continuity of critical operations,” he added.
The RBI Governor also said that the Monetary Policy Committee (MPC) noted that in India too, economic activity had started to recover, but surges of fresh infections have forced fresh lockdowns, hence several high-frequency indicators have levelled off.
“Taking into consideration all factors, the GDP growth in the first half of the year is estimated to remain in the contraction zone. For the year 2020-21 as a whole, real GDP growth is also estimated to be negative,” he added.