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 The Reserve Bank of India's key lending rate was held steady at record lows on Thursday, but it surprised markets by leaving its key deposit rate unchanged against some economists' predictions of a hike to re-align it with short-term money market rates.

The monetary policy committee held the lending rate, or the repo rate, at 4%. The reverse repo rate, or the key borrowing rate, was also kept unchanged at 3.35%.

The MPC voted unanimously to maintain the status quo on the repo rate and by a majority of 5-1 to retain the accommodative policy stance.

Respondents in a Feb. 2-4 Reuters poll were closely split on the timing of the repo rate rise, with slightly more than half, 17 of 32, expecting a 25-basis point increase to 4.25% in April.

COMMENTARY

GARIMA KAPOOR, ECONOMIST - INSTITUTIONAL EQUITIES, ELARA CAPITAL, MUMBAI

"Facing a tough choice between policy rate normalisation amid sticky inflation and global tightening of financial conditions and limiting the increase in yields amid record high government borrowing programme for FY23, in line with our expectations, the MPC retained both policy repo and reverse repo rate and also maintained accommodative stance to support growth on a durable basis."

"The recent stress in the bond market, comfort on medium term inflation outlook and need to address uneven domestic growth seem to have prompted the decision. We now expect RBI to hike reverse repo rate in Q1FY23 followed by a repo rate hike in Q3FY23."

RUPA REGE NITSURE, GROUP CHIEF ECONOMIST, L&T FINANCIAL HOLDINGS, MUMBAI

"By staying pat on policy rates and keeping the stance at accommodative, the MPC is trying to avoid a knee-jerk reaction in the fixed income markets. This may help banks to avoid huge mark to market losses at the quarter end."

"Market participants are already moving towards normalisation following the signals coming from the global economy & the actions of the global central banks. However, today's monetary policy announcement will provide a short term relief to the market sentiment."