RBI:Repo rate unchanged at 4%; stance accommodative


Published On: Thursday, August 6, 2020 | By:

RBI:Repo rate unchanged at 4%; stance accommodative

The RBI today(6th August 2020) decided to keep the benchmark repo rate unchanged at 4 percent, already the lowest since 2000, and reverse repo rate at 3.35 percent. The six-member Monetary Policy Committee (MPC) of the RBI, headed by the Governor Shaktikanta Das, announced the decision after its 24th two-day bi-monthly meeting. 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. Governor Shaktikanta Das said the MPC voted to keep interest rate unchanged and continue with its accommodative stance to support growth. "Global economic activity has remained fragile. A surge in Covid-19 cases has subdued early signs of revival, said Das, adding: "Economic activity had started to recover, but a surge in infection has forced imposition of lockdowns." Supply chain disruptions were persisting and inflationary pressures were evident across segments, he said.

In its outlook for the rest of the year, the RBI MPC noted that inflation was expected to remain elevated in the second quarter of 2020-21 and ease thereafter in the second half of the year. On the economic growth front, Governor Das said, without putting any number to it, that India's real gross domestic product would contract in the first half of FY21 as well as full financial year.

In the run-up to the announcement, experts had mostly been divided over the possibility of a rate cut, with many ruling it out saying a call on restructuring of loans and discontinuation of moratorium was more likely. Finance Minister Nirmala Sitharaman had said that focus was now on restructuring. "The focus is on restructuring. The finance ministry is actively engaged with the RBI on this. In principle, the idea that there may be a restructuring required is well taken," she had said last week.

The six-month moratorium given by the RBI ends on August 31. Rating agency Icra had said in a report that an extension of moratorium and one-time restructuring of loan could pose challenges to lenders and also impact their financial stability if the quantum was large.


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