What does RBI's status quo on key policy rates mean?

Going against popular expectations, the Reserve Bank of India’s six-member Monetary Policy Committee voted to keep the repo rate and the reverse repo rate unchanged for a tenth straight meeting at 4% and 3.35% respectively.
 
The rate-setting panel decided by a majority of 5 to 1 to continue with the accommodative stance as long as necessary to revive and sustain growth on a durable basis and continue to mitigate the impact of Covid-19 on the economy.
 
The RBI has projected real GDP growth at a modest 7.8% for FY23
 
Economists largely predicted a hike in the reverse repo rate, to fight inflationary pressures.
 
Reverse repo rate is the rate RBI pays banks when they park their excess liquidity with it and therefore a hike would have meant sucking out some liquidity from the system. The gap between the two key rates, called the policy corridor, is maintained at 25 basis points during normal times.
 
Governor Shaktikanta Das, while acknowledging that the overall system liquidity remains in surplus, also gave justification for why the RBI had left the reverse repo rate unchanged. He said the Central bank had managed to achieve a rise in the effective reverse repo rate in the market to 3.87% compared to 3.37% in end-August, in a non-disruptive and seamless manner without adjusting the official rate.
 
The effective rate is based on the weighted average rate of the fixed rate reverse repo and the variable rate reverse repos of longer maturity.

To the question on why the RBI has not followed in the footsteps of other central banks in unwinding liquidity, Das said, “The character of inflation is somewhat different in those economies compared to India”.
He said the improving inflation outlook provided comfort to the Monetary Policy Committee, which believes that retail inflation edging higher to 5.59% in December was due to unfavourable base effects.
 
The expectation that RBI won’t tinker with repo rate in the near future bodes well for borrowers. As floating home loans rates are directly linked to the repo rate, a continuation of the accommodative stance supports the environment of affordability. Homebuyers will get to enjoy decadal low home loan rates for some more time.
 

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