MUMBAI: The Reserve Bank of India on Wednesday announced a road map to ease surplus liquidity of over Rs 9 lakh crore, which it used last year to cushion the economic impact of the pandemic. The policy, which kept all key rates unchanged, was seen as brash as the RBI chose to tip-toe towards its objective of policy normalization (reducing liquidity in the system) without disrupting financial markets. Is.
The Monetary Policy Committee (MPC) unanimously voted to uphold it. repo The rate at which RBI lends to banks at 4%. The reverse repo rate, at which it borrows from banks, was also retained at 3.35%. The MPC also voted 5:1 to maintain an adjustment policy with an external member. Jayanth Varma dissenting voting. However, the central bank will withdraw Rs 1.5 lakh crore more from the system. It has managed to do so by raising the variable rate reverse repo auction, which currently stands at Rs 6 lakh crore, to Rs 6.5 lakh crore by December 17 and Rs 7.5 lakh crore by December 31.
“Overall, the recovery that has been disrupted by the second wave of the pandemic is gaining traction, but it is not yet strong enough to be self-sustaining and sustainable. This underscores the critical importance of continued policy support,” RBI Governor Shaktikanta Das Explaining the status quo on rates, he said.
In his post-policy conference, Das said the central bank’s overarching priority was the revival of growth and that it would focus on growth without losing price stability. Das said, “Various sectors of the economy have crossed their pre-pandemic levels, but in some of the key components such as private investment and private consumption, which are very important for GDP growth, we are still facing the pre-pandemic level.” level behind.” The governor also highlighted downside risks to the economy from global factors, including uncertainty from the Omicron version.
While the repo rate hike does not appear to be taking place this year, economists expect surplus liquidity to normalize by January 2022. “Overnight rates tend to move towards the upper end of the aisle (between RBI’s repo and reverse repo rate) when the total amount is parked. Overnight reverse repo has declined by less than Rs 1 lakh crore, and this January It is likely to start from ’22. This corridor will complete the normalization process. A hike in the reverse repo rate beyond that could be the ideal opportunity and better timing, no growth in the post-Omicron transition,” said SBI Group chief economist Soumya Kanti Ghosh,
The Monetary Policy Committee (MPC) unanimously voted to uphold it. repo The rate at which RBI lends to banks at 4%. The reverse repo rate, at which it borrows from banks, was also retained at 3.35%. The MPC also voted 5:1 to maintain an adjustment policy with an external member. Jayanth Varma dissenting voting. However, the central bank will withdraw Rs 1.5 lakh crore more from the system. It has managed to do so by raising the variable rate reverse repo auction, which currently stands at Rs 6 lakh crore, to Rs 6.5 lakh crore by December 17 and Rs 7.5 lakh crore by December 31.
“Overall, the recovery that has been disrupted by the second wave of the pandemic is gaining traction, but it is not yet strong enough to be self-sustaining and sustainable. This underscores the critical importance of continued policy support,” RBI Governor Shaktikanta Das Explaining the status quo on rates, he said.
In his post-policy conference, Das said the central bank’s overarching priority was the revival of growth and that it would focus on growth without losing price stability. Das said, “Various sectors of the economy have crossed their pre-pandemic levels, but in some of the key components such as private investment and private consumption, which are very important for GDP growth, we are still facing the pre-pandemic level.” level behind.” The governor also highlighted downside risks to the economy from global factors, including uncertainty from the Omicron version.
While the repo rate hike does not appear to be taking place this year, economists expect surplus liquidity to normalize by January 2022. “Overnight rates tend to move towards the upper end of the aisle (between RBI’s repo and reverse repo rate) when the total amount is parked. Overnight reverse repo has declined by less than Rs 1 lakh crore, and this January It is likely to start from ’22. This corridor will complete the normalization process. A hike in the reverse repo rate beyond that could be the ideal opportunity and better timing, no growth in the post-Omicron transition,” said SBI Group chief economist Soumya Kanti Ghosh,
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