RBI Keeps Repo Rate Unchanged At 4%, GDP Forecast Cut To 9.5% For FY22

RBI Keeps Repo Rate Unchanged At 4%, GDP Forecast Cut To 9.5% For FY22

According to the RBI governor, unlike the first wave, the impact of the second COVID-19 wave on economic activity is expected to be relatively contained as people and businesses are adapting to the changing conditions.

The Reserve Bank of India (RBI) on Friday announced that the repo rate (the rate at which banks borrow money from RBI) unchanged at 4% and also cut the GDP forecast to 9.5% for the financial year 2021-22.

Given that the country is reeling under the impact of the second COVID-19 wave, the Monetary Policy Committee (MPC) of the RBI unanimously voted to maintain the status quo on policy rates and decided to continue with an accommodative stance to revive and sustain growth on a sustainable basis.

gdp
The RBI cut the GDP forecast to 9.5% by the RBI

In his statement, RBI Governor Shaktikanta Das said though the GDP growth in FY21 contracted to 7.3%, the forecast of a normal south-west monsoon, the resilience of agriculture and the farm economy, the adoption of COVID compatible operational models by businesses, and the gathering momentum of global recovery are forces that can provide tailwinds to the revival of domestic economic activity when the second wave abates.

According to the RBI governor, unlike the first wave, the impact of the second COVID-19 wave on economic activity is expected to be relatively contained as people and businesses are adapting to the changing conditions.

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The marginal standing facility (MSF) rate and the bank rate remain unchanged at 4.25%. The reverse repo rate also remains unchanged at 3.35%.

Consumer Price Index (CPI) inflation is projected at 5.1% for FY22. Giving the breakup, Das said, the CPI inflation is expected at 18.5% in Q1, at 7.9% in Q2, 7.2% in Q3, and 6.6% in Q4, CNBC TV-18 reported

The RBI has also provided additional relief measures for the on-tap liquidity window for contact intensive sectors. A liquidity window of Rs 15,000 crore is opened until March 31, 2022, with a 3-year tenor at a repo rate. Under this, banks can provide fresh lending support to travel, tourism, aviation, ancillary, and other services like private bus operators, etc. Banks will be permitted to park surplus to the extent of loan book for contact intensive sectors at 40 bps higher than reverse rate.


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