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RBI keeps repo rate unchanged; pegs GDP at 10.5%

NEW DELHI: The Reserve Bank of India (RBI) on Wednesday decided to keep key lending rates unchanged for the fifth consecutive time in its April policy review meeting. While, it retained the gross domestic product (GDP) growth at 10.5 per cent.
The six-member monetary policy committee (MPC), headed by governor Shaktikanta Das, retained repo rate at 4 per cent and reverse repo rate at 3.35 per cent.
The central bank also stuck to its accommodative stance amid concerns that rising Covid-19 infections could derail the country’s nascent economic recovery.
“The MPC judged that monetary policy should remain accommodative till prospects of sustained recovery are well secured,” RBI governor Shaktikanta Das said.
Repo rate is the rate at which the RBI lends to banks, while reverse repo rate is the rate at which it borrows from banks.
The decision comes as a resurgence in cases has prompted many state governments to resume coronavirus restrictions this week, fuelling concerns about economic activity. India reported 115,736 new coronavirus infections on Wednesday, its biggest single day rise so far.
The Reserve Bank mainly factors in the retail inflation while arriving at its bi-monthly monetary policy.
The MPC projected inflation edging up to 5.2 per cent in the first half of the new fiscal from 5 per cent in the January-March period and moderate to 4.4 per cent in Q3 of FY22.
Last month, the government had asked the central bank to maintain retail inflation at 4 per cent with a margin of 2 per cent on either side for another five-year period ending March 2026.
The annual retail inflation rate rose to 5.03 per cent in February, a three-month high due to the rise in fuel prices.
The MPC has kept the key benchmark rate unchanged since the last four reviews now. It had last revised its policy rate on May 22, 2020, in an off-policy cycle to perk up demand by cutting interest rate to a historic low.
The central bank has cut policy rates by 115 basis points since February last year.

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