RBI Monetary Policy: Key takeaways from Governor Shaktikanta Das#39; address
Reserve Bank of India (RBI) Governor Shaktikanta Das
The RBI Monetary Policy Committee (MPC) on April 7 kept the key policy rates unchanged at 4 percent indicating that a status-quo will desirable at this juncture when the growth-inflation scenario remains uncertain.
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Here are key updates from RBI governor Shaktikanta Das’ address:
> RBI Governor Shaktikanta Das said that the MPC voted unanimously to keep the policy rates unchanged. “The accommodative policy stance will continue for as long as necessary,” Das said.
> The marginal standing facility (MSF) rate and the bank rate remain unchanged at 4.25 percent. The reverse repo rate stands unchanged at 3.35 percent.
> MPC maintained the GDP growth outlook for FY22 at 10.5 percent consisting of 26.2 percent in Q1; 8.3 percent in Q2; 5.4 percent in Q3; and 6.2 percent in Q4. The Committee had projected this estimate during the previous policy announcement.
Read: RBI doubles payments bank balance limit to Rs 2 lakh
> Q1FY22 GDP growth outlook is 22.6 percent, and for Q2FY22 at 8.3 percent, Das said.
> The projection for CPI inflation has been revised to 5.0 percent in Q4:2020-21; 5.2 percent in Q1:2021-22; 5.2 percent in Q2; 4.4 percent in Q3; and 5.1 percent in Q4.
> Das said that monetary policy over the next five years would aim at consolidating and building upon the credibility gains of the first 5 years of flexible inflation targeting.
Read: RBI Monetary Policy – Key takeaways from Governor Shaktikanta Das’ address
> For the year 2021-22, RBI has decided to put in place a secondary market G-sec acquisition programme or G-SAP 1.0. Under the programme, the RBI will commit upfront to a specific amount of open market purchases of government securities to enable a stable and orderly evolution of the yield curve.
> For Q1 of 2021-22, RBI announced a G-SAP of Rs 1 lakh crore. The first purchase of government securities for an aggregate amount of Rs 25,000 crore under G-SAP 1.0 will be conducted on April 15, 2021.
> To increase the focus of liquidity measures on the revival of activity in specific sectors, the RBI extended the deadline of TLTRO on the Tap Scheme till September 30, 2021. The scheme was announced on October 9, 2020, and was made available up to March 31, 2021.
> Further, to expand the ability of payments banks, the current limit on the maximum end of day balance of Rs 1 lakh per individual customer will be increased to Rs 2 lakh with immediate effect.
> RBI also announced additional credit flow to All India Financial Institutions. Liquidity support of Rs 50,000 crore for fresh lending during 2021-22 will be provided to AIFIs: Rs 25,000 crore to NABARD; Rs 10,000 crore to NHB; and Rs 15,000 crore to SIDBI.
> RBI also proposed to constitute a committee to undertake a comprehensive review of the working of Asset Reconstruction Companies (ARCs) and recommend measures to enable these entities to meet the growing requirements of the financial sector.
> Real-Time Gross Settlement (RTGS) and National Electronic Funds Transfer (NEFT) facilities will now be extended to non-bank payment institutions, expanding the reach of the payment systems. Membership of Centralised Payment Systems (CPSs) was so far restricted to banks.
> Das said that prospects for FY 2021-22 strengthened with the progress of the COVID-19 vaccination programme. “However, the recent surge in infections have imparted greater uncertainty to the outlook; need to be closely watched,” he added.
> On global growth, Das said that vaccine distribution and its efficacy is key to global economic recovery.