RBI maintains status quo on policy rate at 4%

Mumbai: Maintaining status quo for the second time in a row, Reserve Bank of India on Friday decided to keep benchmark interest rate unchanged at 4 per cent but maintained an accommodative stance, implying more rate cuts in the future if the need arises to support the economy hit by the COVID-19 crisis.

The benchmark repurchase (repo) rate has been left unchanged at 4 per cent, Governor Shaktikanta Das said while announcing the decisions taken by the central bank’s Monetary Policy Committee (MPC).

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

He said MPC voted for keeping the interest rate unchanged and continued with its accommodative stance to support growth.

RBI had last revised its policy rate on May 22, in an off-policy cycle to perk up demand by cutting interest rate to a historic low.

The 25th meeting of the rate-setting MPC with three new external members -Ashima Goyal, Jayanth R Varma and Shashanka Bhide began on October 7. This is the maiden meeting of the new members who were appointed just a day before the meeting for a term of four years.

It is to be noted that MPC meeting earlier slated between September 29 and October 1 was deferred for the first time as government failed to appoint external members before the scheduled date.

The government moved the interest rate setting role from the RBI Governor to the six-member MPC in 2016. Half of the panel, headed by the Governor, is made up of external independent members.

MPC has been given the mandate to maintain annual inflation at 4 per cent until March 31, 2021, with an upper tolerance of 6 per cent and lower tolerance of 2 per cent.