RBI keeps repo rate unchanged at 4%
The Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) has decided to keep the repo rate unchanged at 4%. The reverse repo rate will be 3.35% while the Marginal Standing Facility (MSF) remains unchanged at 4.25%, RBI Governor Shaktikanta Das said on Wednesday after a key meeting. Here are more details on this.
Why does it matter?
This is the ninth straight time the RBI has kept key lending rates unchanged. The apex bank has notably kept rates low since last year in view of the COVID-19 pandemic. Wednesday's announcement comes amid concerns over the new Omicron variant of coronavirus which has triggered panic and threatened economic recoveries made at the global and local levels.
'Economic outlook clouded by Omicron'
"We hold strong buffer to manage global spillovers and inflation is broadly aligned with target. We are better prepared to deal with the invisible enemy - COVID-19. The domestic economic outlook is somewhat clouded by Omicron variant," Governor Das said.
What are repo and reverse repo rates?
Repo stands for repurchase agreement. It is the rate at which the RBI lends money to commercial banks across the country. Separately, the reverse repo rate is the opposite of repo rate - it refers to the rate at which the RBI borrows funds from commercial banks in the country. Both of these are short-term loans.
9.5% GDP growth target maintained
The RBI has retained GDP (Gross Domestic Product) growth target at 9.5% for the current fiscal year (FY 2021-22). Retail inflation is projected at 5.3% for the same period, the RBI Governor said. In the last MPC meeting on December 8, the central bank had kept key rates unchanged for the eighth consecutive time.
