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RBI Retains Repo Rate At 4%, Status Quo Remains Same For 8th Time

MPC decided to keep the benchmark repurchase (repo) rate at 4 per cent, Das said while announcing the bi-monthly monetary policy review.

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The Monetary Policy Committee (MPC), on Friday, decided to keep the benchmark interest rate unchanged at 4 per cent, however, maintained an accommodative stance, amid the positive sign in the Indian economy, after the deadly Coronavirus second wave.

The MPC led by Shaktikanta Das, Governor of the Reserve Bank of India (RBI), has maintained the status quo, the eighth time in a row, meanwhile, benchmark repurchase (repo) rate at 4 per cent, Das said while announcing the bi-monthly monetary policy review.

Talking about the reverse repo rate, it will also continue to earn 3.35 per cent for banks for their deposits kept with RBI.

Das said that MPC unanimously voted to keep the interest rate unchanged and move forward to continue with its accommodative stance as long as it is required to support growth and keep inflation within the target.

In the month of August, the retail inflation was at 5.3 per cent.

Suvodeep Rakshit, Senior Economist, Kotak Institutional Equities, said, "The RBI policy, as expected, remained cautious and in a wait-and-watch mode. Even as it increased the quantum under the 14-day VRRR auctions and opened the option of 28-day VRRR auctions, it adequately sounded out on its dovishness and the need to ensure liquidity conditions remain comfortable. We do not see the RBI in a hurry to normalize liquidity conditions as well as the reverse repo rate in the near term. We continue to see the February policy as the earliest period of review for the RBI to narrow the policy rate corridor by raising the reverse repo rate."

MPC also has given its mandate to keep annual inflation at 4 per cent until March 31, 2026, with an upper tolerance of 6 per cent and lower tolerance of 2 per cent. 

"The MPC outcome of status quo on rates and stance was overall in line with expectations. RBI's revised projections of CPI inflation are now in sync with our expectations. Going ahead we expect RBI to continue to tweak liquidity gradually through higher quantum and tenure of VRRRs. The December policy should set the tone for the reverse rate hike to begin normalisation of the policy corridor,"  said, Upasna Bhardwaj, Senior Economist at Kotak Mahindra Bank.


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rbi status quo repo rate