RBI keeps interest rate unchanged, to maintain accommodative stance

Mumbai, Jun 04 (PTI):
The Reserve Bank of India (RBI) on Friday left key interest rates unchanged at record lows as it reiterated its commitment to keep its monetary policy accommodative, to help the economy recover from the world’s worst outbreak of COVID-19 infections. It also lowered its forecast for the country’s economic growth to 9.5 per cent for the current financial year ending March 31, 2022, from the previous estimate of 10.5 per cent.
The six-member monetary policy committee headed by Governor Shaktikanta Das voted unanimously for keeping repo rate – RBI’s key lending rate – unchanged at 4 per cent, and the reverse repo rate – the borrowing rate – at 3.35 per cent.
“The MPC was of the view that at this juncture policy support from all sides is required to gain the momentum of growth that was evident in the second half of 2021, and to nurture the recovery after it has taken root,” Das said. It decided to retain an accommodative policy stance “as long as necessary to revive and sustain growth on a durable basis and continue to mitigate the impact of COVID-19 on the economy”, signaling there is still room to cut rates further.
RBI expanded its version of quantitative easing to keep borrowing costs anchored. It will buy an additional Rs 1.2 lakh crore of bonds under the Government Securities Acquisition Programme (G-SAP) 2.0 in the second quarter. In April, RBI committed to buying Rs 1 lakh crore worth of government bonds from the market between April and May under G-SAP 1.0.
Under G-SAP 1.0, RBI will purchase government securities worth Rs 40,000 crore this month.
The move is aimed at supporting the government’s borrowing plan at comfortable interest rates.
Das said retail inflation is seen at 5.1 per cent in 2021-22, with upside risks from higher commodity prices and re-emergence of higher supply constraints amidst the current phase of lockdowns.