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Industry Reaction On Reserve Bank of India Kept Repo Rate at 4%

The key repo rate unchanged at 4 per cent in view of rising inflation and faint signs of economic growth amid the gradual lifting of coronavirus (COVID-19) countrywide lockdown.

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The Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) after its three-days meeting kept the reserve repo rate unchanged at 3.35 percent.

The key repo rate unchanged at 4 per cent in view of rising inflation and faint signs of economic growth amid the gradual lifting of coronavirus (COVID-19) countrywide lockdown.

Repo is the rate at which RBI lends funds to commercial banks when needed. It is a tool that the central bank uses to control inflation.

Here is what industry leaders are saying: 

Anuj Puri, Chairman – ANAROCK Property Consultants

Much along the expected lines, the RBI kept repo rate untouched at 4% and reverse repo rate at 3.35% amid a recent rise in retail consumer prices. The RBI was expected to do all it can to keep the inflation rates reined in for the duration.

However, the RBI announced several additional measures that will go on to accelerate the economy, enhance liquidity, improve flow of credit and deepen digital payment facilities, among others. Commendably, its allotment of INR 5,000 crore each to National Housing Bank and NABARD is a much-needed step for sectors including real estate reeling under the liquidity crisis. It will help infuse capital into the HFCs and eventually provide relief to developers battling liquidity issues in COVID-19 times.

Hersh Shah, CEO, India Affiliate of Institute of Risk Management (UK)

“Talking from a risk perspective, changes in repo rates directly impact the economic development in the country. Consumers will borrow more or less from banks thus impacting the inflation. The Indian economy is going through turbulent times due to the ongoing pandemic and associated risks across all sectors. Retail inflation has crossed 6% with food inflation remaining on the higher side and hence the decision to keep the repo rate unchanged is aimed at controlling inflation. Furthermore, an accommodative stance highlights RBI's concerns over the growth outlook in coming months and removes ambiguity with respect to a potential rate increase. Additional measures such as loan restructuring, enhanced LTV on gold loans, additional liquidity for NHB and NABARD, including loans to startups under priority sector are sure to bring about inclusive development.”