Speaking at the end of the three-day monetary policy meeting (MPC), Reserve Bank of India Governor Shaktikanta Das said, "The MPC voted unanimously to leave the policy repo rate unchanged at 4 percent and continue with the accommodative stance of monetary policy as long as necessary to revive growth, mitigate the impact of COVID-19, while ensuring that inflation remains within the target going forward."
Inflation in Asia's third-largest economy had spiked above the Central Bank's target band of 2-6 percent due to rising prices of food, fuel and gold during the year so far along with supply side constraints due to COVID-19 led lockdown.
"The policy will be seen as a positive for the banking sector since no extension of moratorium, one-time restructuring allowed with strict conditions, a veteran banker in KV Kamath to lead the expert committee and allowing secured loans through gold as collateral with higher LTVs (loan-to-value)," said Amar Ambani, Senior President and Institutional Research Head at Yes Securities, a domestic stock brokerage house.
While economic activity in India had started to recover from the lows of April-May, surges of fresh infections have forced re-clamping of lockdowns in several cities and states, the governor said.
A renewed surge in COVID-19 infections in major economies in July has subdued some early signs of revival that had appeared in May and June, he said.
India ranked third after the United States and Brazil for the total number of cases, with 595,501 active cases and 40,699 deaths reported so far.
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