The Reserve Bank of India (RBI) has decided to keep the key policy rate unchanged at 6.50 per cent for the fifth consecutive time, as it balances the twin challenges of rising inflation and uncertain economic recovery. The central bank’s Monetary Policy Committee (MPC) voted unanimously to maintain the status quo on the repo rate, the rate at which it lends to commercial banks, in its bi-monthly meeting that concluded on Thursday.

The RBI Governor Shaktikanta Das said that the MPC’s decision was guided by its mandate to ensure price stability while supporting growth. He said that the inflation outlook remains uncertain due to supply-side disruptions, high commodity prices and volatile global financial markets. He also said that the growth prospects depend on the pace and coverage of vaccination, the severity of the Covid-19 pandemic and the policy support from the government. The RBI revised its inflation projection for the current fiscal year to 5.7 per cent from 5.1 per cent earlier, while retaining its growth forecast at 9.5 per cent.

The central bank said that it will continue with its accommodative stance as long as necessary to revive and sustain growth on a durable basis, while ensuring that inflation remains within the target range of 2-6 per cent. The RBI also announced several measures to enhance liquidity, credit and financial inclusion in the economy. These include a special liquidity facility of Rs 15,000 crore for contact-intensive sectors such as tourism, hospitality and aviation, a Rs 16,000 crore on-tap liquidity window for microfinance institutions, a Rs 50,000 crore credit guarantee scheme for health infrastructure and a Rs 75,000 crore government securities acquisition programme for the second quarter. The RBI’s policy announcement was largely in line with market expectations and received a positive response from analysts and industry bodies. They welcomed the RBI’s pragmatic approach and its focus on supporting growth and financial stability amid a challenging environment.

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