RBI Pauses On Rate Cut To Curb Inflation

Allows banks to ease personal and corporate loan burdens

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The RBI left interest rates untouched on Thursday in order to rein in rising retail inflation but allowed banks to restructure some corporate and personal loans to revive growth in an economy that has been battered by the Covid-19 pandemic.

RBI governor Shaktikanta Das said space for monetary policy easing remains, but the central bank will ensure inflation stays within its target range.

“Given the uncertainty surrounding the inflation outlook and extremely weak state of the economy in the midst of an unprecedented shock from the ongoing pandemic, the monetary policy committee has decided to keep the policy rate on hold at 4%, RBI governor Shaktikanta Das said after the three-day deliberations of the committee.

The committee, however, unanimously decided to continue to keep its accommodative policy stance “as long as necessary to revive growth,” he added.

The RBI has already reduced the repo rate by a total of 1.15% since February, on top of the 1.35% in an easing cycle last year. Retail inflation in June rose 6.09%, higher than the RBI’s 2%6% mandated target range.

DEBT RESTRUCTURING

To help banks at a time when bad loans are expected to nearly double, the RBI said it would allow a one-time restructuring of loans.