02-05-2021 10:24 AM | Source: Reuters
India holds interest rates steady at record lows as economic outlook improves
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MUMBAI  - The Reserve Bank of India kept rates steady at record low levels as widely expected on Friday and reiterated that it will continue to support the recovering economy by ensuring ample rupee liquidity in the banking system.

The repo rate or RBI's key lending rate was held at 4% while the reverse repo rate or its borrowing rate was left unchanged at 3.35%.

The repo rate has been cut by a total 115 basis points since March 2020 to cushion the shock from the pandemic, following a 135 bps reduction since beginning of 2019.

RBI Governor Shaktikanta Das said the MPC unanimously decided to keep rates on hold. He said that the economy's growth outlook had improved and that inflation was expected to remain within the RBI's targeted range over the next few quarters.

After a severe contraction in the June quarter showed India had been one of major economies in the world that had been hardest by the pandemic, a pick up in manufacturing resulted in a much smaller contraction in the September quarter, while the recent start of the immunisation campaign has also lifted some pessimism.

Das said the recent budget proposals and expenditure plans have raised hopes for a more robust recovery, and the bank stood ready to offer support and also ensure that the government's heavy borrowing programme was absorbed smoothly by the market.

The blue chip Nifty 50 index was largely unchanged while the S&P BSE Sensex was up 0.59% after the central bank kept key rates steady.

The rupee strengthened to 72.95 against the dollar, while the benchmark 10-year bond yield was at 6.09%.

 

(Reporting by Swati Bhat and Euan Rocha; Editing by Simon Cameron-Moore)