Lighter interest rates are still needed for economic recovery

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MUMBAI: The Reserve Bank of India (RBI) today pegged the country's economic growth at 7.5% for the financial year 206-2 in a review of lending policy. Which is less than the central government's rate of 5 to 7.5%. The RBI's review concluded that the country's economy may still have time to recover or recover. In this situation, it is necessary to keep the interest rate stable as well as provide financial liquidity to various sectors as required.

In the review, the Reserve Bank kept the repo rate stable at 3% and the reverse repo rate at 7.5%. This is the tenth review in which no change in interest rate has been made.

The Reserve Bank of India's Monetary Policy Committee (MPC) decided to keep the repo rate and reverse repo rate unchanged after a three-day monetary policy review meeting. The MPC had unanimously decided to maintain the repo rate at 3%. The reverse repo rate has been kept unchanged at 7.5 per cent. The market was expecting an increase in the reverse repo rate.

The rate at which the RBI pays the banks when they deposit their excess liquidity in the Reserve Bank is called the reverse repo rate and the rate at which the Reserve Bank provides money to the banks is called the repo rate.

No change in interest rates has been made in the tenth consecutive meeting of the MPC in view of the current macroeconomic situation. Apart from this, accommodative stance will also be maintained till the need arises, said Reserve Bank Governor Shaktikant Das in a statement after the MPC meeting.

This was the first meeting of the MPC after the announcement of the budget for the financial year 207-2. Earlier, the Reserve Bank of India (RBI) had reduced the repo rate on May 9, 2020. The current rate of 5% is at a historic low.

The governor also said that policy support was needed for a stable recovery in the economy. During the Corona period, the Reserve Bank took steps to provide liquidity to the financial system, both directly and indirectly, to support the country's economy.

Stating that India is recovering faster than other countries in the world, Das said that the country's economic growth rate is expected to be 6.50% in the current financial year. In the next financial year, the rate is estimated to be 7.50%.

Speaking on retail inflation, the governor said that the inflation target for the current financial year 2021-2 has been maintained at 7.50 per cent. Inflation is also expected to fall to 7.50 per cent in the financial year 205-2.

One banker said that today's decision by the Reserve Bank of India (RBI) would not lead to an increase in interest rates on loans, including home loans and auto loans, in the near future.


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