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RBI Keeps Policy Interest Rates On Hold For 8th Consecutive Time

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The Reserve Bank of India (RBI) in its third bi-monthly monetary policy for FY22 left policy interest rates or repo rates unchanged. With this, the repo rate remains at 4%, while the reverse repo rate remains unchanged at 3.35%.

 

This was largely in line with expectations from analysts and economists. The Monetary Policy Committee (MPC) also decided to keep the policy stance accomodative, by a 5:1 majority.

RBI Governor Shaktikanta Das in the previous MPC meet decided to keep the repo rate unchanged and continue with the accommodative stance as long as necessary to support growth. Since March 2020, RBI has slashed repo rates to a record low of 4 per cent through two rate cuts of 75 bps in March 2020 and 40 bps in May 2020.

According to Emkay Global, the the RBI has been contending with dilemmas on managing its liquidity stance since Covid first struck last year amid robust FX flows and elevated inflation pressure.

RBI Keeps Policy Interest Rates On Hold For 8th Consecutive Time

"Surplus liquidity has not necessarily percolated well across the curve or segments of the rates market amid asymmetric gains in credit markets and risks of rerouting of surplus liquidity and excessive risk-taking in other asset classes. It is arguably correct that, amid an imminent recovery, such high system liquidity may not be warranted," the brokerage had said in a recent report.

Stock markets were largely expecting the policy decision and the sensex was up more than 360 points, crossing the 60,000 points mark.

Read more about: rbi repo rate
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