Highlights of Monetary Policy issued by RBI For FY 20-21
The newly appointed Monetary Policy Committee (MPC) with Dr. Ashima Goyal, Professor Jayanth R. Varma, and Dr. Shashanka Bhide as external members met on 7th, 8th, and 9th October 2020 in its first meeting and the 25th under the monetary policy framework that was instituted in June 2016. COVID-19 has tested and severely stretched our resources and our endurance. Our travails are not over yet and a renewed rise in infections remains a serious risk. We have, however, come far on an un-traveled road, with self-belief and the courage of hope. We will reach deep into our fortitude and inner strength to overcome whatever formidable challenges COVID-19 may unleash going forward. If we have the resolve to be steadfast until we emerge victoriously, I am confident we will muster the forces needed to subdue the pandemic.
Important Announcements:
• Repo rate unchanged at 4%
• Marginal Standing Facility (MSF) & Bank Rate unchanged at 4.25%
• Reverse repo rate unchanged at 3.35%
• MPC maintained Accommodative Stance
• Unanimous voting to maintain Status Quo
Growth:
• FY21 Real GDP is expected to decline by 9.5%
• GDP growth may turn positive by Q4
• Silver lining visible, rural economy looking resilient
• Three-speed recovery likely – with individual sectors showing varying paces of recovery
Inflation:
• Inflation would ease closer to the target by Q4FY21
• CPI projected at 6.8% for Q2FY21, at 5.4-4.5% for H2FY21, and 4.3% for Q1FY22
Financial Market Guidance:
• Centre WMA (Ways & Means Advances) kept higher at Rs 1.25 lakh crore
• 60% increase in WMA limit for states for H1FY20 extended till 31st Mar-21
• Auctions for outright and Special OMO increased to Rs 20,000 crore
Additional Measures:
• On Tap TLTRO- Tenors of up to three years for a total amount of up to Rs 1,00,000 crore at a floating rate linked to the repo rate.
• SLR Holdings in Held to Maturity category
• OMOs in State Developments Loans
• Support to Exports- Automatic Caution Listing of Exporters
• Regulatory Measures- Regulatory Retail Portfolio (Revised Limit for Risk Weight), Individual Housing Loans (Rationalisation of Risk Weights)
• Financial Inclusion- Review of the Co-origination Model
• Payment and Settlement Systems – Round-the-Clock availability of RTGS, Perpetual Validity for CoA issued PSOs