No Change In Repo Rate; Economic Growth To Contract In H1 FY21: RBI Gov

Addressing the media, RBI Governer Shaktikanta Das said the central bank has decided to leave the repo rate at four percent "The monetary policy committee maintains an accommodative stance," he said. He added: "Global economic activity has remained fragile; the surge in Covid cases has subdued early signs of revival."

Since February, the Reserve Bank of India has already reduced the repo rate by a total of 115 basis points. Economists are of the view that RBI would likely cut the repo rate by another 25 basis points, according to a Reuters poll. While an SBI research report predicted that the RBI would likely leave the Repo Rate unchanged.

Repo rate is the rate at which the central bank lends money to commercial banks in the event of any shortfall of funds. Repo rate is used by monetary authorities to control inflation.

"Taking into consideration all factors, the GDP growth in the first half of the year is estimated to remain in the contraction zone. For the year 2020-21 as a whole, real GDP growth is also estimated to be negative," the RBI Governor said.

The Monetary Policy Committee is expecting inflation to remain elevated in the second quarter and thus, providing an ease in the second half of the fiscal, the Governor said.

An accommodative stance of the monetary policy will continue as long as necessary to revive growth and mitigate the impact of the pandemic, while ensuring that inflation remains within target going forward. RBI is perhaps the only central bank in the world which has set up a special quarantine facility for continuity of critical operations," the central bank's head said.

Domestic equity benchmark Sensex jumped over 150 points in opening session on Thursday ahead of the Reserve Bank of India’s monetary policy outcome.