RBI Keeps Interest Rate Unchanged, Cuts Growth Forecast For Current Fiscal To 9.5%

The central bank has projected retail inflation at 5.1% in 2021-22.

Updated on: 4 June 2021 10:51 am

The Reserve Bank of India has kept interest rates unchanged and cut economic growth forecast for current fiscal to 9.5% from previous 10.5%. It also projected retail inflation at 5.1% in 2021-22.

It decided to leave benchmark interest rate unchanged at 4 per cent but maintained an accommodative stance as the economy faces heat of the second COVID wave.

RBI Governor Shaktikanta Das on Friday said the central bank continues with accommodative stance to revive and sustain growth on sustainable basis. A normal monsoon is expected to provide tailwind for economic revival, he said.

Das also said that recent fall in inflation provides elbow room, policy support from all sides required to regain growth momentum.

The cental bank also said that it will buy Rs 40,000 cr of govt securities on June 17 and Rs 1.20 lakh cr G-Sec will be purchased in Q2

This is the sixth time in a row that the Monetary Policy Committee (MPC) headed by RBI Governor Shaktikanta Das has maintained status quo. RBI had last revised its policy rate on May 22, 2020, in an off-policy cycle to perk up demand by cutting interest rate to a historic low.

MPC decided to maintain status quo, that is keeping benchmark repurchase (repo) rate at 4 per cent, Das said while announcing the bi-monthly monetary policy review on Friday.

Consequently, the reverse repo rate will also continue to earn 3.35 per cent for banks for their deposits kept with RBI.

Das said MPC voted unanimously for keeping interest rate unchanged and decided to continue with its accommodative stance as long as necessary to support growth and keep inflation within the target.

The central bank lowered its estimate for economic growth to 9.5 per cent for the current fiscal from earlier projection of 10.5 per cent due to the impact of the second COVID wave.

This is the first MPC meeting after official data showed that Indian economy contracted 7.3 per cent in the last fiscal, weighed down by nationwide lockdown that pummelled consumption and halted most economic activities.

With regard to inflation, the governor said that retail inflation is likely to be 5.1 per cent during the current fiscal.

MPC has been given the mandate to maintain annual inflation at 4 per cent until March 31, 2026, with an upper tolerance of 6 per cent and a lower tolerance of 2 per cent.

(PTI)