RBI maintains established order, says will guarantee ample liquidity


Sandeep Dikshit

Tribune News Service

New Delhi, December 4

The RBI on Friday gave cautious thumbs up to the economy even as it kept the interest rates unchanged as inflation remained well above the upper end of the target band.

Data available for the third quarter confirms that the economy is recuperating faster than anticipated and more sectors are joining the multi-speed upturn. Corporate results for the second quarter also indicate that demand conditions are recovering and profit margins are rising on the back of cost saving on expenses and debt servicing capacity has gone up.

Key takeaways of monetary policy review

  • The RBI left benchmark interest rate unchanged at 4% but maintained an accommodative stance, implying more rate cuts in the future if need arises
  • The central bank said retail inflation is likely to remain elevated and pegged it at 6.8% for the third quarter
  • It also revised real GDP growth projection for FY 20-21 to -7.5%

“At the same time, the signs of recovery are far from being broad-based and are dependent on sustained policy support,” warned the RBI’s Monetary Policy Committee.

Against the backdrop of the folding up of two private banks in quick succession, RBI Governor Shaktikanta Das said the central bank was committed to preserving depositors’ interest in the financial system.

The MPC decided to continue with the accommodative stance as long as necessary to revive growth and mitigate the impact of Covid on the economy, while ensuring that inflation remains within the target going forward. — Shaktikanta Das, RBI Governor

Although India is technically in recession because of negative growth in two quarters, the GDP will enter positive territory in the third quarter (October-December). In the final quarter of 2020-21, it would grow by 0.7%. Overall, the fiscal will end with a (-) 7.5% de-growth, the RBI chief said. The RBI had earlier expected GDP to contract by 9.5%.

RTGS to be available 24X7 soon

The RBI on Friday said the Real Time Gross Settlement (RTGS) system, used for large value transactions, will be made available round-the-clock in the next few days.



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