RBI’s six-member Monetary Policy Committee (MPC), led by Governor Shaktikanta Das, on Friday decided to give rate cut a miss.The central bank kept its policy stance ‘accommodative’.
RBI Governor Shaktikanta Das said today that the country’s economy is likely to contract 9.5 per cent in the current financial year, “with risks tilted to the downside”, while maintaining a status quo on policy rates citing high inflation.
The GDP may break out of the coronavirus-induced contraction and turn positive by the fourth quarter of 2020, Governor Das said.
The Monetary Policy Committee – whose three new external members voted in today’s policy action – unanimously favoured holding the repo rate at the existing 4 per cent, while retaining an “accommodative” stance – which rules out any hikes for the time being.
The newly-constituted MPC of the central bank began its three-day deliberations on October 7, amid speculation that it will maintain status quo on the benchmark lending rates in view of hardening inflation.
The meeting of the six-member panel, earlier scheduled for September 29-October 1, was rescheduled after appointment of independent members was delayed.
In its August meet, the MPC left the repo rate unchanged at 4 percent and reverse repo rate at 3.35 percent.
Since February 2019, the MPC has cut repo rate by a steep 250 basis points.
According to Das, banks that have availed of funds earlier under the TLTRO and TLTRO 2 schemes earlier will be given the option of reversing these transactions before maturity.
“In view of the borrowing requirements of the centre and the states in the second half of FY21 and the likely pickup in demand for credit as the recovery gathers strength, on-tap TLTROs are intended to enable banks to conduct their operations smoothly and seamlessly without being hindered by liquidity frictions.
The objective is to ensure that liquidity in the system remains comfortable,” Das added.
