RBI Keeps Key Rates Unchanged: “As Long As Necessary To Revive Growth”

The Reserve Bank has maintained status quo on interest rates for the eighth consecutive time, while asserting that the rates will remain unchanged “as long as necessary to revive growth.” The repo rate – the rate at which the central bank lends short-term money to banks – is unchanged at 4 per cent and the reverse repo rate is the same at 3.35 per cent, the RBI Governor Shaktikanta Das said at the end of the bi-monthly Monetary Policy Committee (MPC) review meeting that started on Wednesday.The central bank also retained an ‘accommodative’ monetary stance i.e. a willingness to either cut the rates or keep them steady, depending on the evolving situation.The Reserve Bank last cut its policy rates on May 22, 2020, in an off-policy cycle when the covid-19 pandemic first shook the country. The central bank has slashed its key lending rate i.e. repo rate by 115 basis points since March 2020 to cushion the economy from the aftershock of coronavirus.The RBI has also maintained FY22 GDP growth target at 9.5 per cent. Mr Das said the central bank sees Q2FY22 GDP growth at 7.9 per cent, Q1FY23 GDP growth at 17.1 per cent and Q4FY22 GDP growth at 6.1 per cent.Rating agency Moody’s had recently upgraded India’s rating outlook to “stable” from “negative.” The global rating agency said economic recovery is in progress as activity is gradually picking up and spreading across sectors.Fitch Ratings, on the other hand, has lowered India’s GDP forecast to 8.7 per cent for the current financial year from the earlier projection of 10 per cent in June, mainly due to the second wave of the coronavirus pandemic.Meanwhile, India’s services industry expanded for a second straight month in September, bolstered by improved domestic demand and easing Covid-19 restrictions, pushing companies to hire more employees for the first time in nearly a year. The IHS Markit Services Purchasing Managers’ Index eased to 55.2 in September from August’s 18-month high of 56.7, but stayed comfortably above the 50-mark separating growth from contraction.



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