What is RBI Monetary Policy 2021? Repo & Reverse Repo Rate Unchanged- Check GDP & Growth Target for FY22

Indian Central Bank that is the Reserve Bank of India formulates the monetary policy. But do you know what is a monetary policy and why does any country need it? Find out all about it in the article below. Also, check India's current monetary policy and all the details about RBI monetary policy 2021 below. 

But before that let’s run a quick fact through you. RBI gets the power to control inflation because of the monetary policy it sets every year. 

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RBI Monetary Policy 2021: Major Announcements

The major announcements of the Reserve Bank of India made by Shaktikanta Das (The Governor of RBI) involve:

1. No change in Repo Rate. It remains at 4%
2. No change in Reverse Repo Rate. It remains at 3.35%. 
3. The MPC voted 5:1 in favour of the maintenance of the accommodative stance.
4. MSF remains unchanged at 4.25%. (MSF- Marginal Standing Facility)
5. GDP growth target retained at 9.5% this year as well. 

RBI Monetary Policy 2021: Details

Let us study in detail the current monetary policy here. As you read above the repo and reverse repo rates stand the same which means that the lending and borrowing rates are the same.  The decision to keep the repo and reverse repo rates unchanged has been expected by various economists. The recovering economy requires all the support from the Central Bank of India. RBI aims to re-establish the 14-day Variable Reverse Repo Rate as the major liquidity operation. The Reserve Bank would absorb INR 6.5 lakh crore in the VRRR auction on December 17, 2021.

The Central Bank has revised its Q3 FY 22 GDP growth to 6.6 per cent from 6.8 per cent. It has dropped by 0.2%. The Q4 FY22 GDP was cut down to 6% from 6.1%. The FY22 CPI inflation target is maintained at 5.3% overall still. The target of October- November 2021 was revised to 5.1 per cent from earlier 4.5 %. The CPI Inflation target of January - March was revised to 5.7% compared to 5.8% previously. 

The further forecasts have been revised as follows:

1. Q1FY23 GDP growth forecast- retained at 17.2 per cent
2. Q2FY23 GDP growth- At 7.8 per cent
3. Q1FY23 CPI forecast- Revised to 5% from 5.2 per cent
4. Q2FY23 CPI forecast set at 5 per cent 

RBI would also provide permission to the banks to infuse capital in overseas branches, repatriate profit without its prior permission this year. This would allow the Indian economy to stand shoulder to shoulder with the global economies that are opening up to reach their pre-pandemic levels. 

The Central Bank has also vouched to continue managing the liquidity in a manner of bringing financial stability, as it remains the cardinal principle of RBI to foster the growth of the economy.

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