How RBI Monetary Policy: Repo rate unchanged at 4 per cent for 10th consecutive time.

        This is the tenth straight meeting where the key policy rates have been left unchanged.

        While analysts expected the RBI to raise the reverse repo rate, the MPC maintained its dovish, stance, flagging potential downside risks to economic activity from the third wave of the Covid-19 pandemic.

       Here are the key takeaways from the monetary policy statement:

Inflation: 

      The MPC also noted that consumer price inflation has edged higher since its last meeting. The hardening of crude oil prices present a major upside risk to the inflation outlook, it said. The central bank retained a CPI-based retail inflation forecast of 5.3% for FY22. It, however, expects CPI inflation to moderate to 4.5% in FY23. RBI governor Shaktikanta Dais said that inflation is expected to peak in the fourth quarter of the current fiscal.

       The MPC noted that the potential pickup of input costs is a contingent risk, especially if international crude oil prices remain elevated. "The pace of the domestic recovery is catching up with pre-pandemic trends, but private consumption is still lagging. Covid-19 continues to impart some uncertainty to the future outlook."

 Growth outlook: 

       The MPC projects FY23 GDP growth at 7.8% with Q1FY23 at 17.2%; Q2 at 7.0%; Q3 at 4.3%; and Q4 at 4.5%. "In India, real GDP growth at 9.2% for 2021-22 takes it modestly above the level of GDP in 2019-20. Private consumption, the mainstay of domestic demand, continues to trail its pre-pandemic level," Dais said. The persistent increase in international commodity prices, surge in volatility of global financial markets and global supply bottlenecks can exacerbate risks to the outlook, he added.

 Banks: 

        The RBI governor cautioned that banks and non-banking financial companies need to be watchful, as the unwinding of the loose monetary policies could have spillover effects. "We have to be, however, watchful of the impact of the pandemic on the banking and NBFC sectors when the effects of regulatory reliefs and resolutions fully work their way through. Banks and other financial entities would be well advised to further strengthen their corporate governance and risk management strategies to build resilience in an increasingly dynamic and uncertain economic environment. They also need to continue the process of capital augmentation and building up of appropriate buffers," Dais said.