RBI Maintains Repo Rate at 4% Eleventh Time in a Row

The Reserve Bank of India (RBI) maintained key interest rates steady for the eleventh time in a row on Friday, maintaining its accommodative stance.

The monetary policy committee maintained the lending rate, or repo rate, at 4%. The reverse repo rate, popularly known as the key borrowing rate, remained constant at 3.35 percent.

The RBI’s monetary policy committee (MPC) convened for the first time this financial year.

The six-member MPC, led by RBI Governor Shaktikanta Das, convened for three days beginning April 6.

The repo rate is the interest rate at which the Fed loans to commercial banks. The reverse repo rate, on the other hand, is the rate at which the RBI borrows money from banks in the near term in order to suck out excess liquidity in the system.

The central bank last changed the policy rate on May 22, 2020, during an off-cycle effort to boost demand by reducing interest rates to a historic low.

It also increased its inflation prediction for the current financial year to 5.7 percent, up from 4.5 percent in the previous financial year.

The prolonged conflict between Russia and Ukraine has pushed up inflation in India, with major commodity prices rising.

Since the last meeting in February, the Brent crude price has risen by 21%, domestic petrol and diesel pump prices have risen by 6.5%, residential LPG cylinder prices have risen by 6%, commercial LPG has risen by 12.5%, and edible oils have risen by roughly 12%.

It decreased its growth forecast to 7.2 percent from 7.8 percent previously.

Shaktikanta Das stated that it will begin a multi-year process of gradually withdrawing cash this year. Das stated that economic activity is barely above pre-pandemic levels but is steadily recovering.