RBI Monetary Policy: Highlights
Reserve Bank of India (RBI) Governor Shaktikanta Das has announced the monetary policy today. Following are the key points to be noted in the monetary policy
The Monetary Policy Committee (MPC) decided to keep the repo rate unchanged at 4 percent. Reverse repo rate remained unchanged at 3.35 percent. It has decided to continue with the accommodative stance of monetary policy as long as necessary – at least during the current financial year and into the next year – to revive growth on a durable basis and mitigate the impact of COVID-19.
The Marginal Standing Facility (MSF) rate and the Bank rate remain unchanged at 4.25 per cent.
The RBI has also decided to make available the Real Time Gross Settlement (RTGS) system round the clock on all days from December 2020. This will facilitate innovations in the large value payments ecosystem and promote ease of doing business.
The manufacturing purchasing managers’ index (PMI) for September 2020 rose to 56.8, its highest mark since January 2012, supported by acceleration in new orders and production. The services PMI for September at 49.8 remained in contraction but has risen from 41.8 in August.
The Indian economy will contract 9.5% in fiscal 2021 due to disruptions caused by the covid-19 pandemic that has hit economic activities, according to Reserve Bank of India (RBI) governor Shaktikanta Das. However, he also said growth "may break out of contraction and turn positive during January-March" due to improving signs of recovery.
Central bank will conduct on tap Targeted Long Term Repo Operations (TLTROs) of Rs 1 lakh crore for up to three years at floating rates linked to the repo rate. This would help banks conduct operations smoothly and seamlessly without being hindered by illiquidity frictions. These TLTRO funds will be deployed in corporate bonds, commercial papers, and non-convertible debentures. The enhanced held-to-maturity (HTM) limit of 22% of government bonds has been extended till March 2022.
The RBI said inflation will remain elevated in the September 2020, but would ease closer to the target by Q4:2020-21.
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