RBI leaves policy rates unchanged

The Monetary Policy Committee (MPC), with three new external members, on Friday decided to maintain status quo on the policy repo rate as the August 2020 retail inflation print of 6.70 per cent was above its upper tolerance level of 6 per cent.

“The MPC voted unanimously to leave the policy rate unchanged...and to keep the monetary policy stance accommodative... at least through this fiscal and the next financial year,” said RBI Governor Shaktikanta Das.

So, the policy repo rate (the interest rate at which the Reserve Bank of India provides liquidity to banks to overcome short-term mismatches) continues at 4 per cent.

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While the GDP contraction of 23.9 per cent in the first quarter is definitely a cause for concern, the MPC has already delivered a cumulative 115 basis points cut (since March 27, 2020 till date) in the policy repo rate to revive the fortunes of the pandemic ravaged economy.

The Reserve Bank of India (RBI), on September 28, rescheduled the MPC meeting, which was originally scheduled during September 29, 30 and October 1, 2020, as the Government had not appointed external members on MPC.

Following the appointment of Ashima Goyal (Professor at the Indira Gandhi Institute of Development Research), Jayanth R Varma (Professor at the Indian Institute of Management, Ahmedabad) and Shashanka Bhide (Senior Advisor at the National Council for Applied Economic Research) as members, the MPC meeting was scheduled during October 7, 8 and 9.

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