<p>The Reserve Bank of India (RBI) on Friday raised inflation forecast for the current financial year by more than half a percentage points to 5.7% on high crude and raw material costs. But the central bank chose to keep key policy rates unchanged to support the "nascent and hesitant" recovery of the economy that is trying to secure a foothold in "extremely difficult conditions".</p>.<p>Repo rate, or the key lending rate at which the RBI lends short-term funds to banks, was retained at 4%. The India Inc said keeping the interest rate at lower level will boost both businesses and consumers.</p>.<p>"Inflation may remain close to the upper tolerance band for the second quarter of 2020-21. But this pressure should ebb in the third quarter of 2021-22 on account of kharif harvest arrivals and supply side measures," Governor Shaktikanta Das said unveiling the monetary policy review.</p>.<p>The RBI’s upper tolerance band for consumer inflation is 6%.</p>.<p><strong>Read more: <a href="https://www.deccanherald.com/business/business-news/rbi-to-pump-rs-50000-crore-via-g-sap-20-in-august-1016779.html" target="_blank">RBI to pump Rs 50,000 crore via G-SAP 2.0 in August </a></strong></p>.<p>The RBI, however, retained the GDP growth target at 9.5% but said economy is yet to recover from the second Covid wave and the country needed to be vigilant against any possibility of a third wave.</p>.<p>Das said the RBI remains in the "whatever it takes" mode, with a readiness to deploy all its policy levers — monetary, prudential or regulatory — to give a boost to growth.</p>.<p>He reiterated that India is in a much better position compared to June 2021. "High-frequency indicators suggest that consumption (both private and government), investment and external demand are all on the path of regaining traction. However, at this stage, continued policy support from all sides — fiscal, monetary and sectoral — is required to nurture the nascent and hesitant recovery," he said.</p>.<p>Between February 2019 (which was Das' first policy announcement when he cut the repo rate by a modest 25 basis points to 6.25%) and July 2021, the central bank has slashed the key policy interest rate by a full 250 bps to 4%, Das told reporters at the customary post-policy press interaction.</p>.<p>He said since the policy rate cuts began in February 2019, both new as well as old borrowers have benefited from the monetary policy transmission to the tune of 217 bps and 170 bps respectively.</p>.<p>In a move to help troubled companies struggling due to the pandemic, the RBI decided to defer the target date by six months to October 1, 2022, for meeting certain operational thresholds outlined by the K V Kamath committee under the Covid-19 debt-recast scheme announced last year.</p>
<p>The Reserve Bank of India (RBI) on Friday raised inflation forecast for the current financial year by more than half a percentage points to 5.7% on high crude and raw material costs. But the central bank chose to keep key policy rates unchanged to support the "nascent and hesitant" recovery of the economy that is trying to secure a foothold in "extremely difficult conditions".</p>.<p>Repo rate, or the key lending rate at which the RBI lends short-term funds to banks, was retained at 4%. The India Inc said keeping the interest rate at lower level will boost both businesses and consumers.</p>.<p>"Inflation may remain close to the upper tolerance band for the second quarter of 2020-21. But this pressure should ebb in the third quarter of 2021-22 on account of kharif harvest arrivals and supply side measures," Governor Shaktikanta Das said unveiling the monetary policy review.</p>.<p>The RBI’s upper tolerance band for consumer inflation is 6%.</p>.<p><strong>Read more: <a href="https://www.deccanherald.com/business/business-news/rbi-to-pump-rs-50000-crore-via-g-sap-20-in-august-1016779.html" target="_blank">RBI to pump Rs 50,000 crore via G-SAP 2.0 in August </a></strong></p>.<p>The RBI, however, retained the GDP growth target at 9.5% but said economy is yet to recover from the second Covid wave and the country needed to be vigilant against any possibility of a third wave.</p>.<p>Das said the RBI remains in the "whatever it takes" mode, with a readiness to deploy all its policy levers — monetary, prudential or regulatory — to give a boost to growth.</p>.<p>He reiterated that India is in a much better position compared to June 2021. "High-frequency indicators suggest that consumption (both private and government), investment and external demand are all on the path of regaining traction. However, at this stage, continued policy support from all sides — fiscal, monetary and sectoral — is required to nurture the nascent and hesitant recovery," he said.</p>.<p>Between February 2019 (which was Das' first policy announcement when he cut the repo rate by a modest 25 basis points to 6.25%) and July 2021, the central bank has slashed the key policy interest rate by a full 250 bps to 4%, Das told reporters at the customary post-policy press interaction.</p>.<p>He said since the policy rate cuts began in February 2019, both new as well as old borrowers have benefited from the monetary policy transmission to the tune of 217 bps and 170 bps respectively.</p>.<p>In a move to help troubled companies struggling due to the pandemic, the RBI decided to defer the target date by six months to October 1, 2022, for meeting certain operational thresholds outlined by the K V Kamath committee under the Covid-19 debt-recast scheme announced last year.</p>
