Repo rate unchanged at 4%; GDP to contract by 9.5% in current FY: RBI governor – Times of India

NEW DELHI: The Reserve Bank of India (RBI) on Thursday decided to keep key lending rate unchanged in its October policy review meeting. The six-member monetary policy committee (MPC), headed by RBI governor Shaktikanta Das, kept repo rate untouched at 4 per cent; and reverse repo rate at 3.35 per cent while maintaining accommodative stance.
Repo rate is the rate at which the RBI lends to banks, while reverse repo rate is at which it borrows from banks.
Indian economy entering into decisive phase in fight against coronavirus, the RBI governor said after the MPC meet.
Contraction in economic growth of Q1 behind us, silver linings are visible. Focus must shift from containment to reviving economy, he added.

Inflation may ease to projected target by Q4 (fourth quarter) of FY21; while GDP (gross domestic product) growth may break out of contraction and enter positive zone by Q4 of current fiscal, Das further mentioned.
Das also stated that real GDP expected to contract by 9.5 per cent in the current fiscal.
The RBI was forced to postpone its MPC meeting for the first time after the Centre delayed in appointing three external members to replace the earlier economists who completed their four-year term in August.

The three new members are Ashima Goyal (professor at the Indira Gandhi Institute of Development Research), Jayanth R Varma (professor of finance & accounting at the Indian Institute of Management, Ahmedabad), and Shashanka Bhide (senior adviser, National Council of Applied Economic Research).
The fast-changing macroeconomic environment and the deteriorating growth outlook necessitated off-cycle meetings of the MPC — first in March and then again in May 2020.
The MPC had cumulatively cut the repo rate by 115 basis points (bps) over these two meetings, which resulted in total policy rate reduction of 250 bps since February 2019, with an aim to boost economic growth.
The central bank has been taking steps proactively to limit the damage to the economy caused by the pandemic and subsequent lockdowns.
When the RBI cuts rates, banks are expected to pass on the benefit to customers and reduce interest rates on home, auto, personal or other loans which may result in lower EMIs (equated monthly instalments).
(With PTI inputs)