RBI keeps repo rate unchanged at 4 percent, maintains accommodative stance

The Reserve Bank of India (RBI) on Friday kept the repo rate unchanged at 4 per cent and maintained the policy stance at accommodative.

The RBI's Monetary Policy Committee (MPC) made a unanimous decision to maintain the status quo after a three-day meeting that began on December 2. The benchmark repurchase (repo) rate has been left unchanged at 4 per cent, Governor Shaktikanta Das said while announcing the decisions taken by the central bank's Monetary Policy Committee (MPC).

The reverse repo rate also remains steady at 3.35 percent, RBI Governor Shaktikanta Das said. He added that the MPC will maintain the accommodative stance "for as long as necessary."

RBI Governor Shaktikanta Das said MPC voted for keeping the interest rate unchanged and continued with its accommodative stance to support growth. The central bank had slashed the repo rate by 115 basis points since late March to support growth. RBI had last revised its policy rate on May 22, in an off-policy cycle to perk up demand by cutting interest rates to a historic low.

Das said the MPC was of the view that inflation is likely to remain elevated with some relief in the winter months from prices of perishables and bumper kharif arrivals. Repo is the rate at which RBI lends funds to commercial banks when needed. It is a tool that the central bank uses to control inflation. The reverse repo rate is the rate at which the RBI borrows from banks.

While there are some signs of a pick up in economic activity due to the staggered easing of a lockdown, there is a large degree of uncertainty amid a surge in coronavirus cases.

The 26th meeting of the rate-setting MPC with three external members -- Ashima Goyal, Jayanth R Varma, and Shashanka Bhide -- began on December 2. This is the second meeting of these members who are appointed for a term of four years. The government moved the interest rate setting role from the RBI Governor to the six-member MPC in 2016. Half of the panel, headed by the Governor, is made up of external independent members.

(Inputs from ANI and PTI)

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