Corporates hail RBI’s decision to keep Repo rates unchanged

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INDIA’s share markets reacted positively following Reserve Bank of India leaving the repo rate unchanged and announcing visible gradual economic recovery. At repo rate , commercial banks borrow money by selling their securities to the RBI to maintain liquidity  in case of shortage of funds or due to some statutory measures. It is one of the main tools of RBI to keep inflation under control. The central banker also assured the trade and commerce that it remains committed to meet any eventuality due to lack of liquidity to help out any sector of economic activity. The marginal standing facility remains unchanged at 4.25 per cent and reverse repo rate stands unchanged at 3.35 per cent. Announcing the unanimous decision taken by the central Banks’s Monetary Policy Committee, RBI Governor  Shaktikanta Das said on Friday, 04 December 2020 that the MPC has decided to leave the marginal standing facility unchanged at 4.25 per cent and reverse repo rate stands unchanged at 3.35 per cent. The MPC is of the view that inflation is likely to remain elevated with some relief in the winter months from the prices of perishables and bumper kharif arrival. The signs of recovery are far from being broad based and are dependent on sustained policy support. The real GDP growth is projected at minus 7.5 percent in 2020-21, Shaktikanta Das stated .The  recovery in rural demand is expected to strengthen further, while urban demand is also gaining momentum. Business sentiment of manufacturing firms is gradually improving, he said pointing out that private investment is still slack and capacity utilisation has not fully recovered. A small window is available for pro- active supply management strategy to break the inflation spiral being fuelled by supply chain disruptions. Further efforts are necessary to mitigate supply-side driven inflation pressures. The RBI is committed to preserve the stability of the financial sector and will do whatever is necessary on this front.
stronger credit ratings. Throughout the Covid-19 pandemic period, RBI acted ‘’pre-emptively’’ to face the challenge head-on posed by the virus and fallout of the pandemic on the Indian economy. Picture courtesy :Groww. edited by PK Chakravarty 

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