The Monetary Policy Committee (MPC) headed by Reserve Bank Governor Shaktikanta Das on Friday announced its policy decision at the end of the 3-day bi-monthly review meeting. The Monetary Policy Committee maintained status quo on key policy rates and its future stance to support growth and tackle inflation.
“The MPC unanimously kept key rates unchanged and reiterated its lenient stance on both rates and liquidity. However, Prof Verma’s disagreement on continuing the liberal stance for the foreseeable future continues to divide the MPC. We do not see RBI deploying any direct tightening tools like MSS, CRR hike, FX swap or outright OMO sale in the coming quarters. Instead, we expect the RBI to allow natural stabilizers such as increased credit offtake and higher CIC etc. to reduce the liquidity surplus,” said Madhavi Arora, principal economist, Emkay Global Financial Services.
Here are the key announcements by RBI Governor Shaktikanta Das:
RBI’s inflation forecast for the current fiscal was reduced to 5.3 per cent versus 5.7 per cent. It has been reduced to 5.1 per cent versus 5.9 per cent for the second quarter of the current fiscal. The forecast for the third quarter has been lowered to 4.5 per cent. It has been retained at 5.8 per cent for the previous quarter. It has been kept at 5.2 per cent for the first quarter of the next financial year.
Real GDP growth for the current fiscal is estimated at 9.5 per cent. Das said the central bank sees Q2FY22 GDP growth at 7.9 per cent, Q1FY23 GDP growth at 17.1 per cent and Q4FY22 GDP growth at 6.1 per cent.
Das-led MPC maintains status quo on repo and reverse repo rate to support growth and tackle inflation. It kept the repo rate unchanged at 4 per cent and the reverse repo rate at 3.35 per cent.
Das announced a new scheme on retail digital payment solutions in offline mode.
The governor also announced that the marginal standing facility (MSF) has been kept unchanged at 4.25 per cent. He said the July-September CPI inflation was “below forecast”.
RBI stops buying G-SAP bonds, Governor Das said there is no need to conduct further G-SAP operations. However, it will continue to operate the open market as needed.
– All new payment acceptance infrastructure including POS machines and QR codes will be geo-tagged
Transaction limit through IMPS has been increased from Rs 2 lakh to Rs 5 lakh.
SLTR auction for small finance banks will continue beyond the original deadline of October 2021 to December 2021.
Shaktikanta Das on Friday said, “With the worst of the second wave behind us and a substantial pick-up in COVID19 vaccination, giving more confidence to open up and normalize economic activities, the Indian economy’s recovery is gaining traction. “
Domestic economic activity picks up with the ups and downs of the second wave. Going forward, looking at normal kharif sowing, rural demand is likely to remain buoyant, while Rabi prospects are bright, the RBI governor said.
Industrial production registered high year-on-year growth for the fifth consecutive month in July after a prolonged slowdown. Manufacturing PMI remained in positive territory at 53.7 in September. Service activity gained ground with support from suppressed demand for contact-intensive activities.
– Overall, aggregate demand is improving but sluggishness remains; output is still
Das said the recovery is below pre-pandemic levels and the recovery is uneven and dependent on continued policy support.
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