Reserve Bank of India (RBI) Governor Shaktikanta Das issued a credit policy on Friday (February 05) saying that the major policy rate did not change the repo, the repo rate remains at 4 percent. The RBI governor said that the liberal stance in monetary policy for the financial year 2021-22 has been retained. GDP growth rate is estimated to be 10.5 percent in the next financial year. Inflation has come to a satisfactory range of 4 percent. The outlook for economic growth has been positive, with signs of revival strengthened. Vegetable prices are expected to remain soft in the near future, inflation has been revised in the fourth quarter of 2020-21, it is estimated to be 5.2 percent.
The RBI governor said that the government will review the inflation target for RBI by March 2021, the inflation target system has worked well. In line with monetary policy, the stance on cash management remains moderate. The Reserve Bank will ensure that the government’s borrowing program from the market goes ahead without disruption. The Reserve Bank has decided to gradually bring the cash reserve ratio (CRR) of banks back to 3.5 percent by 27 March 2021. The cash reserve ratio will be gradually brought back to 4 percent by 27 May 2021.
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It may be noted that in the last three monetary review meetings, the MPC has not changed the interest rates. The repo rate is currently at a record low of 4 percent. The reverse repo rate is 3.35 percent. The Reserve Bank had last revised the policy rates on May 22, 2020. At the time, the central bank cut rates without waiting for the review meeting of the Monetary Policy Committee to boost demand. The central bank has cut the repo rate by 1.15 percent since February last year.
