RBI monetary policy: Interest rates unchanged, GDP projected at 9.5%

The Reserve Bank of India (RBI) on Friday decided to keep the benchmark interest rate unchanged at 4% but maintained an accommodative stance as the economy is yet to recover from the impact of the second COVID wave. The projection for real GDP growth has been retained at 9.5% for 2021-22. 

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

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MPC decided to maintain the status quo, that is keeping the benchmark repurchase (repo) rate at 4%, Das said while announcing the bi-monthly monetary policy review.

Consequently, the reverse repo rate will also continue to earn 3.35% for banks for their deposits kept with RBI.

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

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

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

He further, as per ANI reports, added that CPI inflation is projected at 5.7 % during 2021-22 – this consists of 5.9% in Q2, 5.3% in Q3 and 5.8% in Q4 of 2021-22 with risks broadly balanced. CPI inflation for the first quarter of 2022-23 is projected at 5.1%.