The much-awaited Monetary Policy Committee’s bi-monthly review has finally come out. Reserve Bank of India (RBI) Governor Shaktikanta Das announced the decisions of the committee after a three-day long meet. Interest rates remained unchanged as the committee decided to maintain the status quo and adopt an accommodative stance.
Given the present pandemic that has disrupted economic activities to a certain degree, the committee agreed to maintain the Repo rate and Reverse Repo rate at 4% and 3.5% respectively. As predicted by many experts and analysts, the RBI did not tinker with policy rates amid lingering fears and uncertainty over the COVID-19 pandemic.
RBI Governor Shaktikanta Das said that the Monetary Policy Committee (MPC) unanimously agreed that policy support from all angles was crucial to regain the growth momentum displayed before the second COVID wave hit India.
Accordingly, the RBI will focus on long-term growth rather than inflation and continue to undertake Open Market Operations (OMOs) and inject liquidity as and when required. Rs 36,545 crore has already been issued as additional liquidity along with Rs 60,000 crore under G-SAP 1.0. The central bank has already made plans for G-SAP2.0 worth Rs 1.2 lakh crore for the second quarter of FY 2021-22.
The decision to keep interest rates unchanged is a plus for the real estate sector and home buyers as rates hit a record low. Unchanged rates mean that home loans will not get expensive, allowing home buyers to take advantage and snap up houses on the market. The low rates are also expected to create more demand and stimulate the economy further.
Furthermore, the RBI Governor pointed out the resilience of the agricultural sector and expected rural demands to stay strong as the monsoon forecast remains normal. He stated that the resurgent global economy would benefit India and provide it with the much-needed boost to get its economy back up on its feet.
Quoting Epictetus, Shaktikanta Das said, “The greater the difficulty the more glory in surmounting it.” He also announced additional measures to help the flagging economy and mitigate the effects of the second wave – A Special Liquidity Facility of Rs 16,000 crore will be made available to SIDBI and the National Automated Clearing House (NACH) will be accessible for all days of the week.