Rates unchanged, RBI focus on revival

NEW DELHI: The Reserve Bank of India (RBI) kept interest rates at record lows on Friday and announced additional bond purchases to support the economic recovery, at risk of being derailed by a devastating second wave of Covid-19 infections.

The RBI’S monetary policy committee (MPC) voted unanimously to hold the repo rate, its key lending rate, at 4% and kept the reverse repo rate, the borrowing rate, unchanged at 3.35%, as predicted in a Reuters poll.

The central bank also promised to keep its policy accommodative for as long as necessary, as it downgraded the growth forecast for the 2021-2022 fiscal year and said current inflation pressures would likely be transient.

“At this point of time the MPC has very consciously taken the decision to focus on growth,” said RBI governor Shaktikanta Das during a press conference on Friday.

“The MPC was of the view that at this juncture policy support from all sides is required to gain the momentum of growth that was evident in the second half of 2021 and to nurture the recovery,” Das said earlier in a statement.

India’s annual economic growth rate picked up in January-march compared with the previous three months, but economists are increasingly pessimistic about the June quarter after a huge wave of Covid-19 cases triggered lockdowns in several states.

Das said RBI will buy ₹1.2 lakh crore worth of bonds in the September quarter on top of the quantitative easing programme announced in April. RBI said then it would buy ₹1 lakh crore worth of bonds under the G-SAP 1.0 programme.

Economists said the government would also need to step up

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