RBI keeps repo rate unchanged at 4%

The reverse repo rate or its borrowing rate was left unchanged at 3.35%

The Reserve Bank of India on Friday kept the key policy repo and reverse repo rates unchanged, which halted any immediate reduction in personal loan EMIs of borrowers but cheered fixed deposit investors as banks may not cut interest rates on FDs any further.

After an expansionary Budget, the central bank also lent its support to the government’s effort to re-boot the economy impacted by the pandemic, with Governor Shaktikanta Das introducing a slew of measures such as direct entry of retail investors into the government securities market, ensuring liquidity to targeted sectors, allowing shadow banks to raise funds from the market at lower rates and easy credit to new MSME borrowers, among others.

The repo rate is currently at 4%, kept unchanged for the fourth time in a row.

With inflation expected to remain less than the RBI’s upper target of 6% over the next few quarters, Das said the need of the hour was to continue to support growth, assuage the impact of Covid-19 and return the economy to a higher growth trajectory.

“Clearly, monetary policy is developing in conjunction with the fiscal policy at this time and will likely continue to do so till growth returns materially. While RBI made all the right noises, markets remain worried about high supply pressures and risks to inflation trajectory from a broad-based escalation in cost-push pressures,” economist at RBL Bank Rajni Thakur said.

Going forward, the economy is poised to move in only one direction and that is “upwards”, Das said, giving a thumbs up to a heightened expenditure plan of the government in the Union Budget and a near-record borrowing programme of Rs 12 lakh crore.

As far as gross market borrowing of Rs 12 lakh crore is concerned, Das said the RBI will ensure the orderly completion of the programme.