The six-member monetary policy committee of the Reserve Bank of India had unanimously agreed on retaining the repo rate at its last meeting, but not all members favoured continuation of the 'accommodative stance'.
According to the minutes of the MPC meet which took place from 6th to 8th December, all six members unanimously voted to retain the RBI's repo rate, or short-term lending rate, for commercial banks, at 4%.
Likewise, the reverse repo rate was kept unchanged at 3.35%, and the marginal standing facility (MSF) rate and the Bank Rate at 4.25%.
All members, except Prof Jayanth R Varma, voted to continue with the accommodative stance.
"I believe that monetary policy is no longer the right instrument to deal with the COVID-19 pandemic whose economic effects (as opposed to its health effects) have diminished greatly and become more concentrated in narrow pockets of the economy. There is no evidence so far to suggest that the Omicron variant of the COVID-19 virus would change the picture materially," Prof Verma was quoted as saying in the minutes.
"In this environment, it is no longer appropriate to stick to the monetary policy stance first adopted in May 2020 when the adverse economic effects of the pandemic were at their peak."
On his part, RBI governor Shaktikanta Das said: "In the domestic front, even as the prospects for economic activity are improving, there is still a slack with key drivers like private consumption remaining well below their pre-pandemic levels. Given these uncertainties, continued policy support is warranted for a durable, broad-based and self-sustaining rebound, especially to nurture revival in sectors which are lagging and to safeguard those which are exposed to the evolving headwinds.
"In this scenario, it would be prudent to watch out for growth signals becoming well entrenched while remaining vigilant on inflation dynamics. There is also a necessity to have a firm understanding of the impact of the Omicron variant."
Calibration and timing of a monetary policy response and preventing build-up of financial stability risks are very important in such an uncertain environment, he added.
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