RBI Monetary Policy 2022: MPC Keeps Repo Rate Unchanged At 4%, Maintaining 'Accommodative Stance'

The RBI maintains accommodative stance in the backdrop of an elevated level of inflation; reverse repo rate remains unchanged at 3.35 per cent. The real GDP growth is projected at 7.8% for FY22-23

The RBI said that the CPI inflation projection retained at 5.3 per cent for FY21-22, and 4.5 per cent for FY22-23. Image: Getty

New Delhi: The Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) on Thursday kept the repo rate unchanged at 4 per cent for the 10th time in a row and continued with "accommodative stance" in the backdrop of an elevated level of inflation.

Making the announcement, RBI Governor Shaktikanta Das said that the MPC has also kept the reverse repo rate unchanged at 3.35 per cent while announcing the bi-monthly monetary policy review. The reverse repo rate will continue to earn 3.35 per cent interest for banks for their deposits kept with the RBI.

Das said that the real GDP growth is projected at 7.8 per cent for FY22-23, while the CPI inflation projection retained at 5.3 per cent for FY21-22, and 4.5 per cent for FY22-23.

The six-member MPC was headed by Governor Das.

The central bank had last revised its policy repo rate or the short-term lending rate on May 22, 2020 in an off-policy cycle to perk up demand by cutting the interest rate to a historic low.

This is the first MPC meeting after the presentation of the Union Budget on February 1.

“India is charting a different course of recovery than the rest of the world, to be the fastest-growing economy,” Das said.

In his speech, Das said the MPC voted unanimously for keeping interest rates unchanged and decided to continue with its accommodative stance as long as necessary to support growth and keep inflation within the target.

Apart from repo and reverse repo rates, the RBI has retained its growth projection at 9.2 per cent and inflation at 5.3 per cent for the current fiscal year.

Retail inflation rose to a five-month high of 5.59 per cent in December from 4.91 per cent in November, mainly because of an uptick in food prices.

MPC has been given the mandate to maintain annual inflation at 4 per cent until March 31, 2026, with an upper tolerance of 6 per cent and a lower tolerance of 2 per cent.

The bi-monthly policy comes against the backdrop of the Budget wherein a nominal gross GDP of 11.1 per cent has been estimated for 2022-23, PTI reported.

“Monetary policy actions will be calibrated and well telegraphed,” Das said, underlining that there won’t be any surprises.

Adhil Shetty, CEO, Bankbazaar.com, said, "It’s almost two years since the repo rate was paused. The wide expectation has been that rates will start rising due to inflationary pressures. That has not happened for now. In fact, the governor’s statement suggests inflation will continue to be under control. This broadly means that interest rates on FD and loans are not going to spike for now, barring small adjustments here and there. Debt funds should continue to perform stably for now, with short-duration funds appearing to be the safer bet."

Earlier, the market widely expected that the RBI could raise the reverse repo rate by 15-40 bps. There is also talk of a hike in the cash reserve ratio (CRR), because there might be a need for the RBI to conduct open market operations to infuse liquidity.

However, just after the announcements of the policy rates by the RBI governor, the stock market reacted positively as investors’ sentiment got boosted. At 11 am, the BSE Sensex was up 435 points to 58,900, while the NSE Nifty logged 130 points higher at 17,593.