RBI keeps lending rates intact, remains accommodative (Ld)

Mumbai, Dec 8, 2018 : In an effort to support a sustainable and lasting economic recovery amid concerns about the Omicron virus of the coronavirus Omicron variant, the Reserve Bank of India retained its key lending rates on Wednesday, along with the growth-oriented accommodating stance, during the pan-ultimate review of monetary policy FY22The Monetary Policy Committee of Indias central banks voted to keep the repo rate (or short-term lending rate) for commercial banks at 4%.

The repo rate (RR) is the rate at the RBI lends money commercial banks or financial institutions to pay for government securities.The reverse repo rate was maintained at 3.35 percent, while the marginal standing facility rate (MSF) and the Bank rate were both unchanged at 4.25 percent.It was widely believed that MPC would maintain rates in line with its accommodative stance.

After the MPCs bimonthly meeting, Shaktikanta Das, Governor of RBI, stated that the second wave pandemic is causing economic disruptions.This recovery is not strong enough to sustain and last for long, so supportive policy measures like accommodative stances are needed.RBI also maintained Indias FY22 GDP growth projection of 9.5%.Das pointed out that Q3 GDP growth is expected to be 6.6%, 6.4% in Q4, 17.2 percent in Q1FY23, and 7.8 percent in Q2FY23 "Overall, the recovery, which was interrupted by the second pandemic wave, is gaining momentum, but it isnt strong enough to sustain itself and be durable." Das stated that this highlights the importance of continuing policy support "Downside risks to our outlook have increased with the emergence Omicron and renewed surges in Covid-19 infections within a number of countries." CPI-based inflation is forecast at 5.3% for FY22.CPI inflation is expected decrease to 5% in Q1FY23, and to remain at 5% in Q2FY23 "In the current environment, it is important that inflation remains within the target range while we focus on a robust recovery," Das stated "Simultaneously the Reserve Bank remains cognizant of the need for financial conditions to be rebalanced, in a systematic and calibrated manner, while preventing the buildup of financial stability risk," the RBI governor said.

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