To support a durable as well as lasting economic recovery amid concerns over the Omicron variant of the coronavirus, the Reserve Bank of India on Wednesday retained its key lending rates along with the growth-oriented accommodative stance during the pan-ultimate monetary policy review of FY22.
The Monetary Policy Committee (MPC) of India's central bank voted to maintain the repo rate, or short-term lending rate, for commercial banks at 4 per cent.
Repo Rate (RR) is the rate at which the RBI lends money to commercial banks or financial institutions against government securities.
The reverse repo rate was also kept unchanged at 3.35 per cent, and the marginal standing facility (MSF) rate and the 'Bank Rate' at 4.25 per cent.
It was widely expected that MPC would hold rates along with the accommodative stance.
In a virtual address after the MPC's bi-monthly meet, RBI Governor Shaktikanta Das said that economic recovery disrupted by the second wave of the pandemic is gaining traction.
However, this recovery is still not strong enough to be self sustaining and durable, thereby, supportive policy measures such as accommodative stance are required.
Besides, RBI retained India's FY22 GDP growth projection at 9.5 per cent.
Das pointed out that GDP is expected to grow at 6.6 per cent in Q3, 6 per cent in Q4, 17.2 per cent in Q1FY23 and at 7.8 per cent for Q2FY23.
"Overall, the recovery that had been interrupted by the second wave of the pandemic is regaining traction, but it is not yet strong enough to be self-sustaining and durable. This underscores the vital importance of continued policy support," Das said.
"Downside risks to the outlook have risen with the emergence of Omicron and renewed surges of Covid-19 infections in a number of countries."
Furthermore, the CPI-based inflation is projected at 5.3 per cent for FY22.
The CPI inflation is expected to ease to 5 per cent in Q1FY23 and stay at 5 per cent in Q2FY23.
"In the current situation, it is important to keep inflation aligned with the target while focusing on a robust growth recovery," Das said.
"Simultaneously, the Reserve Bank remains cognisant of the need to ensure that financial conditions are rebalanced in a systematic, calibrated and well-telegraphed manner while preventing build-up of financial stability risks," the RBI governor added.