During this week's monetary policy review, the Reserve Bank of India (RBI) is expected to maintain key lending rates and an accommodative posture to promote growth, according to experts.
The central bank's Monetary Policy Committee will convene between December 6 and 8. "The anticipation was rising that the RBI will raise the reverse repo rate at its December MPC meeting, narrowing the gap between the repo and reverse repo rates. However, the new Covid variant 'Omicron' has re-instilled fear and uncertainty in the world and Indian economies "said Rajani Sinha, Knight Frank India's Chief Economist and National Director of Research.
"Any knee-jerk reaction of Indian and global financial markets to (the US) Fed's monetary policy indication/action adds to the uncertainty." In such a scenario, the RBI is likely to maintain rates on hold at its next meeting, according to Sinha. "While most economic indices have reached pre-Covid levels in terms of growth, the economy still has a lot of slack. As a result, the RBI may opt to wait and see till the next MPC meeting in February 2022 "Sinha said.
The repo rate, or short-term lending rate, for commercial banks is currently set at 4% by the central bank's Monetary Policy Committee. In addition, the reverse repo rate was maintained at 3.35 percent.