RBI keeps repo rate unchanged at 4%, retains accommodative stance

RBI keeps repo rate unchanged at 4%, retains accommodative stance

The RBI MPC on Friday voted to keep the benchmark repo and reverse repo rates unchanged for the 11th consecutive time.

FPJ Web DeskUpdated: Friday, April 08, 2022, 11:03 AM IST
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Despite spiralling inflation, the Reserve Bank is likely to hold all key rates and retain the accommodative stance, experts said / Representative Image | File photo

The Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) voted unanimously to leave the repo rate unchanged at 4 percent. MPC also voted unanimously to keep stance accommodative. Reverse repo rate hiked to ensure liquidity. RBI will restore liquidity adjustment facility, said RBI governor Shaktikanta Das.

It was widely expected that MPC would hold rates and the accommodative stance.

The RBI MPC on Friday voted to keep the benchmark repo and reverse repo rates unchanged for the 11th consecutive time.

"MPC voted unanimously to leave the repo rate unchanged at 4 per cent. MPC also voted unanimously to keep the stance accommodative," RBI Governor Shaktikanta Das said in his Monetary Policy Statement.

The repo rate is the interest rate at which the RBI lends short-term funds to banks. The reverse repo rate, the interest rate at which the RBI borrows from banks, remains unchanged at 3.35 percent.

Notably, the Marginal Standing Facility (MSF) rate and the Bank Rate have remained unchanged at 4.25 per cent, Das informed.

"We are confronted with new but humongous challenges. Shortage in key commodities, fractures in international financial architecture and fear of de-globalisation. Extreme volatility characterises commodity and financial markets," the RBI Governor said while mentioning that the global economy is witnessing "tectonic shifts" with the commencement of the war in Europe, followed by sanctions and escalating geopolitical tensions.

The governor said, the central bank has successfuly navigated its course through turbulent waters. "With the commencement of the war in Europe, we are confronted with new and humoungous challenges. Conflict in Europe has the potential to derail the global economy," he said.

While the pandemic quickly morphed from a health crisis to one of life and livelihood, conflict in Europe has the potential to derail the global economy. Caught in the cross-currents of multiple headwinds, our approach needs to be cautious but proactive in mitigating the adverse impact on India's growth, inflation and financial conditions," he said.

Keeping the approach " cautious, but proactive", Das said that the RBI is emphasizing on three different aspects which will place India in a position that would enable it to deal with the merging crisis and challenges.

The first, as the RBI Governor listed, was a significant improvement in the external sector. "Second, Foreign Exchange Reserves which are at very comfortable levels. Third, substantial strengthening of the financial sector," Das said. This is the 11th consecutive policy review when the RBI has decided to maintain a status quo on key policy rates. The central bank has not changed repo and reverse repo rates since May 2020.

Das said the Monetary Policy Committee has also decided to maintain an accommodative policy stance.

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