RBI Keeps Rates Unchanged, Takes Steps to Increase Liquidity

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RBI Keeps Rates Unchanged, Takes Steps to Increase Liquidity
Credit: © Reuters.

By Aditya Raghunath

Investing.com -- The Reserve Bank of India’s MPC (Monetary Policy Committee) met on Wednesday to make a slew of announcements on how it plans to ensure economic recovery continues. RBI Governor Shaktikanta Das acknowledged that the second surge has created uncertainty over economic growth recovery but that the RBI has a plan to ensure recovery continues.

As expected, the RBI didn’t change policy rates. They remain at 4%. The MPC voted unanimously to keep rates unchanged. “The accommodative policy stance will continue for as long as necessary,” said Das. The reverse repo rate will remain at 3.35%.

The RBI is also ensuring ample liquidity in the system. Das said, “Central Bank to ensure ample liquidity in system so that productive sector gets adequate credit.” RBI extended the deadline for its TLTRO scheme to September 30, 2021, from March 31. It announced an additional liquidity facility worth Rs 50,000 crore to NABARD, NHB, and SIDBI during 2021-22

The India 10-Year has taken the news positively and moved up to 6.12%. Incidentally, the United States 10-Year has come down to around 1.66% in the last few days. The MPC estimated inflation of 5.2% in Q1 and Q2 of FY22, 4.4% in Q3, and 5.1% in Q4.

Das underlined the fact that global growth is recovering from a slowdown and that vaccine distribution and its efficacy would remain key to global economic recovery.

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