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In a bid to maintain liquidity, RBI keep key rates unchanged

Webdunia
Friday, 4 June 2021 (12:38 IST)
Mumbai: The Reserve Bank of India on Friday kept the key rates unchanged at its bi-monthly review to maintain liquidity as the country continues to recover from the Covid-19 pandemic and its economic implications.
The Repo rate has been maintained at 4 per cent while the reverse repo rate is at 3.35 per cent.
 
Announcing the monetary policy, RBI Governor Shakti Kanta Das said the spread of Covid infection in rural areas and dent of consumption demand in urban areas pose downside risk to growth.
 
The rising crude prices is worsening economic condition.Even, rural demand is expected to remain strong going forward on the back of a normal monsoon, the RBI Governor said.
 
The Apex Bank kept the key rates unaltered for the sixth time in a row.It slashed Repo rates by a total 115 basic points since March 2020 to soften the blow from Covid 19 pandemic, he said.
 
Recent fall in inflation provides elbow room and policy support from all sides required to maintain growth momentum. It is expected the Forex Reserves have breached the $600 billion mark, the RBI governor said.
 
The Apex Bank lowered its estimate for economic growth to 9.5 per cent for the current fiscal from earlier projection of 10.5 per cent due to the impact of the second Covid-19 wave.
 
The monetary policy committee (MPC), headed by Governor Shaktikanta Das, voted unanimously for retained repo rate at 4 per cent and reverse repo rate at 3.35 per cent.
The monetary panel will act to support growth by retaining its accommodative stance for as long as necessary, Mr Das said.
 
The Central Bank stuck to its accommodative stance mainly on account of uncertainty over the impact of the second wave of Covid-19 pandemic.Rural demand is expected to remain strong due to normal monsoon, forecast Guv Das.Considering all factors, real GDP is seen at 9.5 pc in FY21-22. CPI inflation is seen at 5.1 pc FY21-22, he said.
 
Latest CPI inflation print offers RBI some policy elbow room, the RBI Governor said.In his address after the policy outcome, governor Das said that the Reserve Bank will continue to think and plan "out of the box".
 
On inflation, he said that retail inflation is likely to be 5.1 per cent during the current fiscal.
MPC has been given the mandate to maintain annual inflation at 4 per cent until March 31, 2026, with an upper tolerance of 2 per cent.
 
The RBI had last revised its policy rate on May 22, 2020, in an off-policy cycle to perk up demand by cutting interest rato to historic low.
 
Mr Das announced that RBI has lowered its estimate for economic growth to 9.5 percent for 2021-2022 from earlier projection of 10.5 percent due to the impact of the second COVID-19 wave.
 
"Real GDP growth is now projected at 9.5 per cent in 2021-22 consisting of 18.5 per cent in Q1; 7.9 per cent in Q2; 7.2 per cent in Q3; and 6.6 per cent in Q4 of 2021-22," he said.

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