RBI Keeps Policy Rate Unchanged Seventh Time in a Row

Share It

The Reserve Bank of India (RBI) on 6th August decided to keep benchmark interest rate unchanged at 4 per cent but maintained an accommodative stance as the economy is yet to recover from the impact of second COVID wave. This is the seventh time in a row that the Monetary Policy Committee (MPC) headed by RBI Governor Shaktikanta Das has maintained status quo. RBI had last revised its policy rate on May 22, 2020, in an off-policy cycle to perk up demand by cutting interest rate to a historic low. MPC decided to maintain status quo, that is keeping benchmark repurchase (repo) rate at 4 per cent, Das said, “While announcing the bi-monthly monetary policy review. Consequently, the reverse repo rate will also continue to earn 3.35 per cent for banks for their deposits kept with RBI. MPC voted unanimously for keeping interest rate unchanged and decided to continue with its accommodative stance as long as necessary to support growth and keep inflation within the target.” MPC has been given the mandate to maintain annual inflation at 4 per cent until March 31, 2026, with an upper tolerance of 6 per cent and a lower tolerance of 2 per cent. Observing that economy is slowly recovery from brief hiatus, the Governor said, some of the high frequency indicators reflect recovery. Ashish R. Puravankara, Managing Director, Puravankara Limited stated, “To keep the REPO rates unchanged has been a catalyst for the revival of the real estate sector. The decadal low-interest rates have helped sustain homebuyers’ interest in the residential segment, positively impacting the overall demand over the last two quarters. We are confident that RBI will continue to roll out affirmative measures that will boost the realty sector and ensure steady economic growth.” Pritam Chivukula, Hon. Secretary, CREDAI MCHI stated, “We welcome the RBIs decision to continue with their accommodative stance. We urge the Central Government to address the deteriorating health of MSMEs and various other sectors which have been severely impacted by the second wave of the pandemic and are still struggling to get back on track. The low interest rates have been a crucial factor in the revival of the demand in the real estate sector. The buyers are already coming back to the market and we feel that the upcoming festive season will be a lot better than the previous years." Reeza Sebastian, President, Residential Business, Embassy Group expressed,“The RBI’s decision on keeping the repo rate of 4% unchanged comes as a positive move at a time when the economy is on its road to recovery. For home buyers, this decision will help reinstate confidence and further the access to affordable home loans. The unchanged repo rate will also aid in infusing liquidity into the sector and in turn fast track the growth of the real estate market concurred.” Anuj Puri, Chairman - ANAROCK Property Consultants stated, “Had it not been for the pandemic, the RBI could have taken a different stance for the benchmark rates today. The unchanged repo rate regime works well for home loan borrowers as the floating retail loan rates, which is directly linked to external benchmark repo rates, have been at the lowest level in the last two decades. The continuation of this low interest rate regime supports the environment of affordability which has become the new hallmark of the housing market - during the pandemic, and even before.”