'Reverse Repo' hike can wait until worries Omicron: Read SBI Ecowrap

Mumbai: According to the SBI Ecowrap study, the necessity to boost the 'Reverse Repo' rate during the upcoming monetary policy review "can wait" until worries over Covid-19's new variant - Omicron are resolved.

Concerns about Omicron's impact on growth have recently surfaced. The monetary policy review will take place on the 6th and 8th of December. The MPC of the RBI is widely expected to keep key lending rates unchanged.

The central bank's MPC has kept the repo rate, or short-term lending rate, for commercial banks at 4% for the time being. As a result, the reverse repo rate was held steady at 3.35 percent. Furthermore, system liquidity continues in surplus, with an average daily net absorption of Rs 7.6 lakh billion under the liquidity adjustment facility (LAF) in November 2021.

However, since the October policy, the RBI has made measured progress toward liquidity normalisation, with the amount held in overnight fixed reverse repo falling to Rs 2.6 lakh crore from Rs 3.4 lakh crore before the policy. Furthermore, the research stated that the RBI is not obligated to act exclusively in MPC when it comes to the reverse repo rate.

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