RBI expects GDP to contract 9.5% in FY21, holds rates steady
Photo Credit: Reuters

The Reserve Bank of India left key interest rates unchanged on Friday as widely expected, while retaining an accommodative monetary policy stance to support the coronavirus-hit economy.

The RBI sees India's real GDP contracting by 9.5% in the ongoing fiscal year, and economic growth only turning positive in the final January-March quarter, RBI Governor Shaktikanta Das, in a webcast on Friday after a meeting of the monetary policy committee (MPC).

Barring the risk of a second wave of infections, the economy appeared poised to begin a recovery, Das said, noting food grain production was set for record highs and factories and cities were coming back to life.

"Against all odds, we shall strive and revive," said Das, concluding the news conference.

The MPC as expected kept the repo rate, its key lending rate, at 4.0%, while the reverse repo rate or the key borrowing rate stayed at 3.35%. The central bank has slashed the repo rate by 115 basis points (bps) since late March.

The MPC meeting was originally due to conclude on Oct. 1 but had to be rescheduled as the government failed to appoint three new external members to the panel after their terms ended last month.

Indian equities, rose slightly by 0.25% immediately after central bank's decision to hold rates steady, while the 10-year benchmark bond yield fell by 7 bps to 5.9630 and the rupee traded at 73.10 per dollar.

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