No change in Policy Rates, Accommodative Stance

The Reserve Bank of India Friday kept key interest rates and its accommodative stance unchanged to bolster economic recovery as expected but took the first steps towards winding down emergency liquidity measures put in place to fight financial market jitters due to Covid pandemic. Governor Shaktikanta Das walked the extra mile to offer the assurance that normalisation of extraordinary monetary policy need not necessarily mean that the RBI is rowing back on the easy money conditions vital for economic growth anytime soon.

The RBI suspended the Government Securities Acquisition Programme (GSAP) domestic version of US Fed’s quantitative easing aimed at containing bond yields as government borrowing is under control. The amount of funds the RBI can drain out through variable rate reverse repo rate auctions to reduce liquidity has also been enhanced. The policy repo rate at which RBI lends to banks was kept at 4%after the six member monetary policy committee voted unanimously in favour of status quo while the reverse repo rates is at 3.35%.

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