Following the meeting of the Monetary Policy Committee after Budget 2021, Reserve Bank of India Governor Shaktikanta Das that the central bank has decided to keep the key lending rates unchanged. The RBI has kept the repo rate unchanged at 4%, while the reverse repo rate remains at 3.35%.
Addressing a press conference, RBI Governor Shaktikanta Das said it was need of the hour to back growth. He added that the worst was over and economy can move in only upward direction from here. The central bank decided to slash its key lending rate by 115 basis points in March 2020 in order to provide a boost to the economy severely affected by the coronavirus pandemic. The last change in the policy rate was made in May 2020. Since then the status quo has been maintained on repo rates.
Repo rate is the rate at which RBI lends money to commercial banks, while the reverse the repo rate implies the rate at which the central bank borrows money from banks.
According to the latest data, the retail inflation has fallen sharply to 4.59% in December 2020. It stood at 6.93% in November. In the month of December, inflation in food basket has dipped sharply to 3.41%. The inflation was at 9.50% in November due to deflation in prices of the vegetables.
The RBI governor announced that retail investors can buy government bonds through RetailDirect. The move will enable them to open accounts and participate in primary and secondary g-sec market. Das said that the central bank will soon form an expert panel for suggestions on strengthening primary urban co-op banks.
The RBI Governor said that the government will review inflation target for RBI by March 2021. He said inflation targeting has worked well till now.
Indian economy suffered a great deal due to coronavirus pandemic. In the current financial year ending March, GDP is projected to contract by a record 7.7%.