New Delhi: Reserve Bank of India (RBI) on Friday kept the repo rate unchanged at 4 per cent for the 11th time in a row. The reverse repo rate has also been kept unchanged at 3.35 per cent. This is the first bi-monthly policy for the current financial year 2022-23. RBI said it would restore the width of the liquidity adjustment facility to 50 basis points (bps).
RBI Governor Shaktikanta Das said that expected benefits from the ebbing of the Omicron wave are offset by an escalation in geopolitical tensions.”The economy is confronted with new and humongous challenges.
The situation in Europe (Russian-Ukraine conflict) can derail the global economy,” Mr Das added. Real GDP growth is projected at 7.2 per cent for 2022-2023 from a previous projection of 7.8 per cent; while retail inflation is predicted at 5.7 per cent for FY23 from 4.5 per cent earlier, the RBI Governor further said.
The Repo rate is the rate at which a central bank lends money to banks, and the reverse repo rate is at which it borrows from commercial lenders. RBI has held the key repo rate at record lows since May 2020 and reiterated time and again that it will remain supportive of economic growth. The central bank has been mandated by the government to keep inflation in the range of 2-6 per cent.
Retail inflation in February surged to 6.07 per cent, breaching the upper limit of RBI’s target range. RBI mainly factors in the retail inflation while arriving at its bi-monthly monetary policy. Meanwhile, the domestic indices started on a higher note with the Reserve Bank decision in focus.