RBI Monetary Policy: Repo Rate Unchanged At 4%, Stance Remains Accommodative

Amidst surging inflationary pressure and growing uncertainty, the Reserve Bank of India (RBI), the central bank of India has kept the key policy rate unchanged in its Monetary Policy Committee (MPC) April 2022 review. The MPC also decided to maintain the stance as accommodative. The repo rate or the short-term lending rate was reduced on May 22, 2020. Since then, the RBI is keeping the rate the same, at a historic low of 4%. The Repo rate is known as the rate at which the RBI lends money to the commercial banks operating in the country in case of any shortfall of funds. It is one of the most important tools to control the inflation rate in a country. In case of a high inflation rate, the central bank tends to hike the repo rate. Additionally, the reverse repo rate has also been kept the same at 3.35%. India's forex is now standing at Rs. 606.5 billion, according to RBI Governor, Shaktikanta Das.

The Covid-19 pandemic has posed an unprecedented challenge for the Indian economy. From manufacturing to the supply chain, every aspect of the economy was hampered. Additionally, employment generation slipped sharply since then. So, to boost the economy's financial status, the central bank is keeping the repo rate very low. Hence, personal loans, car loans, home loans, etc. became more affordable for common citizens.

Shishir Baijal, Chairman & Managing Director at Knight Frank India told the media, "Since the pandemic, the RBI has continued to maintain an accommodative stance prioritizing a sustained economic growth recovery. Currently, India's key growth indicators are at a nascent stage of recovery and there is still a slack in the economy. The escalating inflation in the economy arising from global commodity price rise and its transmission to the consumer prices would further add downward pressure to a domestic growth trajectory. We reckon that the real estate industry has seen a remarkable improvement mainly on account of low-interest rates and hence hope that any policy change action is nuanced and gradual allowing prospective buyers to recalibrate their property purchase decisions without much disruption."