RBI maintains lending rates; 7.8% GDP growth projected in 2022-23
The Reserve Bank of India (RBI) kept the repo rate unchanged at 4% for the 10th time in a row in its monetary policy review meeting on Thursday. Another key policy rate, the reverse repo rate, has also been kept unchanged at 3.35%. RBI Governor Shaktikanta Das said that the decision had been taken as continued policy support was warranted to support economic growth.
Why does this story matter?
The RBI's monetary policy review takes key policy decisions impacting India's economic growth. The repo rate is the rate at which a central bank lends money to other lenders, and the reverse repo rate is at which it borrows from commercial lenders. Notably, the RBI has held the repo rate at record lows since May 2020, reiterating that it will continue to support growth.
RBI pegged retail inflation at 4.5%
In its policy meeting, the RBI pegged Consumer Price Index (CPI) or retail inflation at 5.3% for the financial year 2021-2022 and 4.5% in FY22-23. This comes as the government has mandated the central bank to keep the inflation in the range of 2-6%. Notably, the RBI mainly factors in retail inflation while arriving at its policy decisions.
Inflation to peak in current quarter
Governor Das said the retail inflation will witness a "peak in the current quarter with tolerance band, moderating in the second half of next fiscal." Notably, the RBI projected retail inflation at 4.9% in Q1 of FY22-23 and 5% in Q2 of the fiscal.
7.8% GDP growth in 2022-23
Governor Das said GDP (Gross Domestic Product) growth of 7.8% is estimated in FY22-23. He said the GDP growth of 9.2% in the FY21-22 would take the economy above pre-pandemic levels. However, the economic momentum incurred some loss due to the emergence of the Omicron variant of coronavirus as demand for contact intensive sector muted, he added.
Other highlights from the meeting
Further, Das said the cap for e-RUPI digital vouchers has been raised from Rs. 10,000 to Rs. 1 lakh. He also said PSU bank balance sheets are stronger than the previous year. NACH mandate limit will be increased to Rs. 3 crore for trade-related settlements, he said. The on-tap liquidity for emergency health services and contact intensive sectors has been extended till June 30.
Monetary policy review meeting was delayed this month
The three-day bi-monthly monetary policy review meeting of the RBI's Monetary Policy Committee was started on Tuesday. Originally, it was scheduled to take place from February 7 to 9. However, it was delayed after Maharashtra declared a day of mourning on February 7 following the death of veteran singer Lata Mangeshkar. Notably, the six-member committee is headed by the RBI Governor.