Tapering Covid: RBI retains rates accommodative stance

Mumbai (IANS) The Reserve Bank of India has retained its key short-term lending rates along with the growth-oriented accommodative stance during the second monetary policy review of FY22.

Accordingly, the Monetary Policy Committee (MPC) of the central bank voted to maintain the repo rate, or short-term lending rate, for commercial banks, at 4 per cent.

Likewise, the reverse repo rate was kept unchanged at 3.35 per cent, and the marginal standing facility (MSF) rate and the 'Bank Rate' at 4.25 per cent.

"The MPC also decided unanimously to continue with the accommodative 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, while ensuring that inflation remains within the target going forward," said RBI Governor Shaktikanta Das said in his post policy statement.

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

"On balance, the MPC was of the view that at this juncture, policy support from all sides is required to regain the momentum of growth that was evident in H2:2020- 21 and to nurture the recovery after it has taken root," Das said in his post policy statement.

"Accordingly, the MPC decided to keep the policy rate at its current level of 4 per cent and to continue with the accommodative 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, while ensuring that inflation remains within the target going forward."

As of now, India suffers from a massive spike in Covid-19 infections.

Consequently, the situation has forced state governments to implement local lockdowns and travel restrictions which have started to slowdown economic activity.

This trend has impacted economic activity.

Accordingly, the RBI revised India's FY22 growth estimates to 9.5 per cent from 10.5 per cent.

It pointed out that expected healthy rural demand on the back of a normal Monsoon and pick up in exports should act as a tailwind for the country's growth.

Besides, he said vaccination process should help to normalise economic activity.

Furthermore, the RBI called upon Centre to give a policy push for exports.

"The need of the hour is for enhanced and targeted policy support for exports. It is opportune now to give further policy push by focusing on quality and scalability," the governor said in his post policy statement.

Additionally, the reserve bank pegged retail inflation for FY22 CPI-based inflation at 5.1 per cent.

The announcement, though, largely factored in by investors, evoked a Luke warm response at the stocks market.

Around 10.55 p.m., thr S&P BSE Sensex l traded at 52,219.08, lower by 13.35 points, or 0.026 per cent, from its previous close.

On the other hand, the Nifty50 of the National Stock Exchange traded at 15,692.95, up by just 2.60 points, or 0.02 per cent, from its previous close.