India keeps banking interest rate at record low 4%
Some had been predicting a cut by 0.25% to stoke more lending activity
Mumbai: India's central bank kept interest rates unchanged on Thursday, opting for inflation to cool before taking further action to boost a fragile economy.
The Monetary Policy Committee voted to keep the benchmark repurchase rate at a record low of 4 per cent, Governor Shaktikanta Das said in an online broadcast. Economists were split on the decision, with half of the 44 surveyed by Bloomberg predicting a 25 basis-point reduction, one predicting a 50-point cut and the rest seeing no change.
The Reserve Bank of India has already reduced the repo rate by a total of 115 basis points since February, on top of the 135 basis points in an easing cycle last year, from 6.50 per cent.
"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 MPC decided to keep the policy rate on hold," Governor Shaktikanta Das said.
Das said the central bank would remain "watchful for a durable reduction in inflation to use the available space to support the revival of the economy." The committee, however, unanimously decided to continue to keep its accommodative policy stance "as long as necessary to revive growth".
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The debt recast will help cash-strapped companies that have been struggling with the economic fallout of the coronavirus. "The underlying theme of this resolution window is preservation of the soundness of the Indian banking sector," said Reserve Bank of India Governor Shaktikanta Das.