October 20, 2021

OPINION: RBI sticks to its stated trajectory but stands ready to act

The Reserve Bank of India (RBI) maintained status quo on policy rates as well as its accommodative stance in its fourth bi-monthly monetary policy decision that was announced on Friday – the decision was along expected lines.

The voting on the policy stance was not unanimous, with Prof. Jayanth Varma (a member of the monetary policy committee) voting against the formulation of the stance. This too was largely expected as he had voted against the stance in the August policy meeting also.

The minutes of the August meeting had revealed that he was not in favour of maintaining the reverse repo rate at 3.35% and had highlighted the need for the normalisation of the width of the liquidity adjustment facility (LAF) corridor as this would enable the monetary policy committee (MPC) to keep the repo rate at 4% for a longer period.

Importantly, the RBI continued on its stated path despite…

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