RBI keeps rate at which it lends money to banks unchanged at 4 per cent


The RBI has keeps the rate at which it lends money to banks unchanged at 4 per cent and the reverse repo rate – the rate at which RBI borrows money from banks – unchanged at 3.35 per cent. The Reserve Bank Governor made the announcement at the end of the three-day Monetary Policy Committee (MPC) that started on Wednesday.  

The Monetary Policy Committee (MPC) has kept the key benchmark rates unchanged in the past five monetary policy meets. The central bank had last cut its policy rates on May 22, 2020, in an off-policy cycle when the covid-19 pandemic first shook the country.

The Reserve Bank has slashed its key lending rates i.e. repo rate by 115 basis points since March 2020 to cushion the economy from the aftershock of coronavirus.

The RBI, in its first bi-monthly monetary policy review for financial year 2021-22, had retained its GDP growth projection at 10.5 per cent for fiscal 2021-22. As per the gross domestic product (GDP) estimates government released earlier this week, the economy contracted by 7.3 per cent in financial year 2020-21, while the agriculture sector witnessed a growth of 3.6 per cent, and the services and industry sectors contracted by 8.4 per cent and seven per cent respectively.

Many economists believe that the worse may be over as cautious unlocking has started in many states amid initial signs that the second Covid curve may have tapered.

The retail inflation has also eased to a three-month low of 4.29 per cent on the account of reduction in food prices such as vegetables and cereals, according to government data. The RBI in its bi-monthly monetary policy review in April 2021 targeted the retail inflation at 5.2 per cent in the first half of the current fiscal 2021-22 and within the two – six per cent band in the medium term.



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