RBI upholds repo rate at 4%, reverse repo rate at 3.5%
On Friday, the Reserve Bank of India (RBI) upheld its earlier policy rates and stance. The six member monetary policy committee (MPC), headed by RBI governor Shaktikanta Das decided to maintain the repo rate at 4 percent and the reverse repo rate at 3.5 percent.
The accommodative stance of the RBI will, reportedly, stay present until required to revive and sustain growth within the economy, with five out of six MPC members voting for the decision.
The institution has also moved to reduce excess liquidity from the system. The surplus liquidity in the economy rose to Rs. 9.5 trillion on October 9. Thus, the RBI will no longer be committing to buy secondary market bonds under G-SAP. It will also absorb a higher amount of liquidity through its 14-day variable rate reverse repo (VRRR) auctions. The RBI predicts that this will reduce surplus liquidity to Rs. 2 to 3 trillion by early December.
RBI deputy governor Michael Petra stated, “The first is the stopping of liquidity; the second is moving liquidity from fixed-rate reverse repo to the auctions […] On the next steps, let me assure you, the RBI has all the adequate instruments. The issue is not of instruments but of timing and calibrations.”
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