On April 6, the Monetary Policy Committee (MPC) chose to retain the repo rate, considering the chaos caused by the global banking crisis with contagion risks.

One basis point is 100th of the percentage point. The MPC kept the repo rate at 6.5%, or the rate it lends short-term funds to banks.

Since May 2022, the RBI has hiked rates by 250 bps ahead of the inflation fight. The panel noted inflation worries are not entirely over yet as the panel will remain cautious ahead. Retail inflation stood at 6.44% in February, fell from 6.52% in January, but remained above the central bank’s comfort level of 6%.

The MPC is pressured to meet its primary mandate as inflation remains above 6%. The MPC will submit a report to the government if inflation stays above 6% for three quarters.

As per the media report, RBI MPC member Jayanth Varma stated that even the repo rate of 6.50% could overshoot the policy rate to achieve price stability, and tightening is not desirable.

The MPC’s hold on the rate hikes resulted at a time when global central banks are gathered in a growth-inflation conundrum. In March, the US Federal Reserve proclaimed a quarter-point rate hike notwithstanding a banking crisis comprising smaller regional banks.