The Reserve Bank of India (RBI) on Friday kept the repo rate and reverse repo rate unchanged at 4% and 3.35, respectively, while continuing the accommodative stance.
Repo and reverse repo rate are two important monetary tools used by the Reserve Bank of India to control the rising inflation and maintain liquidity in the economy. Repo rate is the rate at which RBI lends funds to commercial banks while reverse repo rate is the rate at which RBI borrows fund from commercial banks.
The marginal standing facility (MSF) rate and the bank rate too remain unchanged at 4.25%, said the Reserve Bank of India Governor Shaktikanta Das after the three-day meeting of the Monetary Policy Committee (MPC) which deliberated on the current and evolving macroeconomic and financial developments.
MSF is a rate at which the Reserve Bank of India lends money only to scheduled banks.
He said the Union Budget 2021-22 has provided a strong impetus for the revival of sectors like health and well-being, infrastructure, innovation and research. This will have a multiplier effect going forward, particularly in improving the investment climate and reinvigorating domestic demand, income and employment.
“The Indian economy is poised to move in only one direction and that is upwards. It is our strong conviction backed by forecasts that in 2021-22, we will undo the damage that Covid-19 has inflicted on the economy,” said Das.
He said the real GDP growth is projected at 10.5% in 2021-22.
“The projected increase in capital expenditure augurs well for capacity creation and crowding in private investment, thereby improving the prospects for growth and building credibility around the quality of expenditure,” he said.
Das said the new year 2021 has begun on a strong positive note with vaccination drives in major economies as well as in India. “While the year 2020 tested our capabilities and endurance, 2021 is setting the stage for a new economic era in the course of our history.”
The RBI Governor said retail investors can now directly participate in government securities. “This will broaden the investor base and provide retail investors with enhanced access to participate in the government securities market. This is a major structural reform placing India among select few countries which have similar facilities,” he said adding that details will be announced later. The Centre and the Reserve Bank of India have taken several measures to encourage retail investment in government securities. These include the introduction of non-competitive bidding in primary auctions, permitting stock exchanges to route primary purchases and allowing a specific retail segment in the secondary market, Das said.
