RBI keeps rates steady

MUMBAI: India’s central bank kept interest rates on hold yesterday, as it sought to contain a rise in retail inflation though it vowed to keep policy sufficiently loose to help revive growth in the coronavirusbattered economy.

“Space for monetary policy easing remains, but the Reserve Bank of India will ensure inflation stays within its target range,’’ governor Shaktikanta Das sai.

To ease debt strains on companies and lenders, the RBI said it would allow restructuring of corporate loans by banks, a move that was widely awaited by the industry.

The repo rate was left at 4% and the reverse repo rate at 3.35%. Two-thirds of analysts in a Reuters poll had predicted a 25 basis point cut in the repo rate, while the rest saw no change.

The RBI has already reduced the repo rate by a total of 115 basis points since February, on top of the 135 basis points in an easing cycle last year, from 6.50%.

“Given the uncertainty surrounding the inflation outlook and extremely weak state of the economy in the midst of an unprecedented shock from the ongoing pandemic, the MPC decided to keep the policy rate on hold,” Das said.

The committee, however, unanimously decided to continue to keep its accommodative policy stance “as long as necessary to revive growth”.

The country was placed under one of the strictest lockdowns in the world in late March for more than two months to halt the spread of the coronavirus. The government gradually eased restrictions in June.

“While today’s decision has come as a surprise to us, we believe slack in the economy amid easing inflation rate will provide MPC space to cut the policy rate by 25-50 bps in H2FY21,” said Garima Kapoor, economist at Elara Capital.