RBI’s announcement for the Repo Rate

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RBI did not change interest rates, repo rate remains at 4%

The Reserve Bank has not changed interest rates for the eighth consecutive review. In the monetary policy review held every two months, the repo rate has been kept at 4 percent. The interest at which banks take loans from RBI is called repo rate. With this increase, there is a possibility of increasing interest rates on retail loans as well. The reverse repo rate will remain at 3.35 per cent, while the marginal standing facility rate (MSFR) and the bank rate will remain at 4.25 per cent. The Reserve Bank has kept the policy stance ‘accommodative’. The central bank last changed the repo rate in May 2020. Then it was cut by 0.40 percent.

The central bank cut the repo rate by 1.15 percent in several phases after March 2020 to give a boost to the economy after the pandemic. Earlier, the repo rate was cut by 1.35 percent from 2019 onwards. RBI Governor Shaktikanta Das said that the economy is recovering rapidly in the wake of the second wave of Kovid and vaccination. Record production of Kharif crops is expected. Export demand is also increasing rapidly. RBI Governor Shaktikanta Das hinted at reducing liquidity in the system. At present, there is excess cash of over Rs 9 lakh crore in the monetary system. It will be brought to two to three lakh crores by December. The extra cash was raised to bail out the economy in the pandemic. Now that the economy is slowly recovering, RBI wants to take it back. Taking a first step in this direction, the central bank has stopped buying government bonds from the market. However, Das said that it can be restarted if needed. In the last two quarters, the RBI had injected liquidity into the system by buying government bonds worth Rs 2.2 lakh crore.

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