New Delhi: The Reserve Bank of India is all set to announce the Monetary Policy on Friday and is likely to hold interest rates and continue with accommodative policy stance.


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This is the first monetary policy announcement after the presentation of the Union Budget 2021-22.


The Reserve Bank's rate-setting Monetary Policy Committee (MPC) began its meeting on Wednesday. The six-member MPC headed by RBI Governor Shaktikanta Das has started its deliberations. After the three-day meeting, resolution of the MPC would be announced today (February 5).


The MPC kept the key benchmark rate unchanged in its last three reviews. The current repo rate -- rate at which RBI lends to banks -- is at a record low of 4 per cent. The reverse repo rate -- rate for funds parked by banks with RBI -- is 3.35 per cent.


The RBI had last revised its policy rate on May 22, 2020, in an off-policy cycle to perk up demand by cutting interest rate to a historic low. The central bank has cut policy rates by 115 basis points since February last year.


India's economy is likely to rebound with a 11 per cent growth in the next financial year as it makes a "V-shaped" recovery after witnessing a pandemic-led carnage, as per the Pre-Budget Economic Survey tabled in Parliament.


The Gross Domestic Product (GDP) is projected to contract by a record 7.7 per cent in the current fiscal ending March 31, 2021.


CPI inflation eased sharply in December primarily on account of a substantial correction in food inflation -- by 5 percentage points -- to 3.9 per cent in December from 8.9 per cent in November.


Under the current dispensation, the RBI has been mandated by the government to maintain retail inflation at 4 per cent with a margin of 2 per cent on either side. The inflation target has to be reviewed by end-March 2021.


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The government will borrow Rs 12.05 lakh crore from the market in 2021-22, lower than the Rs 12.80 lakh crore estimated for the current financial year.


With PTI Inputs