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RBI Keeps Repo and Reverse Repo Rates Unchanged After 3-Day Monetary Policy Review

News18.com
But despite the bonhomie with the RBI on growth forecast, the government may remain watchful of the risks.

Mumbai: The Reserve Bank of India (RBI) kept the key policy rates unchanged in its fifth bi-monthly policy announced on Wednesday. With no change in the rates, the repo rate remains at 6.50 percent while the reverse repo rate stands 6.25 percent.

The repo rate is the rate at which the central bank of the country lends funds to the commercial banks. The commercial banks borrow funds only if they witness a shortfall in their funds. The reverse repo rate is used by the monetary policy committee as a tool to control the money supply in the country.

The three-day meeting of the Monetary Policy Committee (MPC) started on December 3.

The MPC, which takes the decisions on the key interest rates, has six members, three of whom are members of the RBI, while the rest are appointed by the Government of India.

The board members include RBI governor Urjit Patel, RBI deputy governor Viral Acharya, executive director Michael Debabrata Patra, IIM Ahmedabad professor Ravindra H Dholakia, Delhi School of Economics director Pami Dua and Indian Statistical Institute Professor Chetan Ghate.

Data released last week showed the economy suffered an unexpectedly sharp slowdown in the July-September quarter, when annual growth slid to 7.1 percent from the two-year high of 8.2 percent posted in the previous quarter. The growth was projected at 7.4 percent for the current fiscal year to March 31.

In October, inflation eased to 3.31 percent.

The RBI had previously projected inflation at 3.9-4.5 percent by the end of March and at 4.8 percent for the first quarter of FY20, citing risks from rising crude oil prices, possible fiscal slippages in an election year, global market volatility.

The RBI has bought bonds worth Rs 10,600 crore through Open Market Operations (OMO) since September and is expected to further infuse Rs 40,000 crore more before the end of this fiscal year. Despite these moves, the system liquidity remains in deficit.