New Delhi: In its first monetary policy for the Financial Year of 2021-22, Reserve Bank of India (RBI) today kept repo rate unchanged at 4 per cent as India is battling the second wave of Covid-19 surge. India’s Central Bank has maintained accommodative stance as the Reverse repo rate stands at 3.35 per cent. The RBI’s monetary policy announcement has come on Wednesday after the Central government had asked the Reserve Bank to maintain retail inflation at 4 per cent with a margin of 2 per cent on either side for another five-year period ending March 2026.Also Read - Patidar Hits Ton As MP Lay One Hand On Coveted Ranji Trophy

RBI Monetary Policy 2021 Highlights, Reserve Bank of India Governor Statement

  1. RBI maintains status quo fifth time in a row on policy rate as the central bank keeps repo unchanged at 4 per cent.
  2. Reserve Bank of India will maintain accommodative monetary policy stance to support growth, keep inflation at targeted level, said Shaktikanta Das, RBI Governor.
  3. Recent surge in COVID-19 infections has created uncertainty over economic growth recovery, says RBI Governor Shaktikanta Das.
  4. The RBI Governor said that focus must be on containing spread of virus and economic recovery.
  5. Meanwhile, RBI has retained economic growth for 2021-22 fiscal at 10.5 per cent in 2021-22 fiscal’s first monetary policy.
  6. RBI will ensure ample liquidity in system so that productive sector gets adequate credit, said Das.
  7. Reserve Bank of India will ensure orderly conduct of government borrowing and preserve financial stability, said Governor Das.
  8. RBI will continue to do whatever it takes to preserve stability and to insulate financial firms from global spillovers, the Reserve Bank of India Governor said.
  9. RBI has announced Rs 50,000 crore additional liquidity facility to NABARD, NHB and SIDBI for fresh lending during the FY 2021-22.
  10. The Reserve Bank of India has enhanced aggregate ways and means advances limits to states to Rs 47,010 crore.

What is Repo Rate?

The central bank mainly factors in the retail inflation based on Consumer Price Index while arriving at its monetary policy. The Repo rate is an indicator of the rate at which commercial banks borrow money by selling their securities to the Reserve Bank of India (RBI) in order to maintain liquidity. Repo rate is basically one of the key tools of RBI to keep inflation under control. On February 5, after the last MPC meet, the central bank had kept the key interest rate (repo) unchanged citing inflationary concerns. Also Read - LEI vs IND 4-day Match: Virat Kohli In Command As India Lead Leicestershire By 366 Runs At Stumps On Day 3

“The decision by RBI to maintain the repo rate status quo will make sure that cost of borrowing will not harden soon. However, a further cut in the key rates would have given a boost to current demand uptick for real estate . The low-interest rates have started impacting the property markets in a positive way as maintaining low finance costs is critical for a sustainable recovery in the real estate sector and enhancing confidence in home buyers. A wave of spending by the government across sectors has also set the stage for years of high growth of the economy which will in-turn influence real estate too. While the government has taken some initiatives to uplift the sector in the past few months by introducing stress funds and stimulus packages, more reforms are required to propel the growth of real estate sector,” said Riaz Maniyar, Co-founder, YieldAsset Real Estate Tech Pvt Ltd. Also Read - Harmanpreet Leads India To Series Sealing Win Over Sri Lanka

While balancing the growth-inflation trade-off to mitigate the impact of the COVID-19 pandemic, the RBI Monetary Policy Committee’s decision to continue with the accommodative policy stance ‘as long as necessary’ is reassuring to the industry and trade. This decision would also get immense support from a slew of other critical measures announced by the central bank, said ASSOCHAM Secretary General,  Deepak Sood.

“As for inflation, we share the RBI’s assessment that the recent softening of the crude oil prices can assuage the input cost pressure. What stands out in RBI’s credit policy review is that despite a recent surge in coronavirus cases, the outlook for the double-digit growth for FY ’22 remains intact as the economy is fast learning to live with the health challenge. The large-scale roll-out of the vaccination programme is also supporting the economy,” said Sood.

Earlier, Governor Shaktikanta Das-headed rate-setting panel MPC started its three-day deliberation on the next monetary policy on Monday amid sudden surge in COVID-19 cases and the government’s recent mandate asking the central bank to keep retail inflation around 4 per cent. Experts were also of the view that the Reserve Bank will maintain status quo on policy rates at its first bi-monthly monetary policy review for the current fiscal. It is also likely to maintain an accommodative policy stance.

In a bid to control price rise, the government in 2016 had given a mandate to RBI to keep the retail inflation at 4 per cent with a margin of 2 per cent on either side for a five-year period ending March 31, 2021.