Reserve Bank Governor Shaktikanta Das-led Monetary Policy Committee (MPC) 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 in its future stance to support growth and tackle inflation.
“The MPC expectedly kept the key rates unchanged unanimously and reiterated its accommodative stance both on rates and liquidity. However, Prof Varma’s dissent on continuation of the accommodative stance for foreseeable future continues to keep MPC in splits. We do not see the RBI deploying any direct tightening tools like MSS, CRR hikes, FX swaps or outright OMO sales in the coming quarters. Instead, we expect the RBI to let natural stabilizers like increased credit offtake and high CIC etc. to reduce the liquidity surplus,’’ said Madhavi Arora, Lead Economist, Emkay Global Financial Services.
Here are the major announcements by RBI Governor Shaktikanta Das:
– The RBI’s inflation forecast for the current financial year was lowered to 5.3 per cent vs 5.7 per cent earlier. For the second quarter of the current financial year, it has been lowered to 5.1 per cent vs 5.9 per cent earlier. Third quarter forecast has been lowered to 4.5 per cent. For the last quarter its has been retained at 5.8 per cent. For the next financial year’s first quarter, it has been pegged at 5.2 per cent.
– Projection for real GDP growth is at 9.5 per cent for the ongoing financial year. Das said the central banks sees Q2FY22 GDP growth at 7.9 percent, Q1FY23 GDP growth at 17.1 percent and Q4FY22 GDP growth at 6.1 percent.
– Das-led MPC maintained status quo on the repo and the reverse repo rate in order to support growth and tackle inflation. It kept the repo rate unchanged at 4 per cent and reverse repo rate untouched at 3.35 per cent.
– Das announced a new scheme on retail digital payments solutions in the offline mode.
– The Governor also announced that Marginal Standing Facility (MSF) has been unchanged at 4.25 percent. He added that the July-September CPI inflation was “lower than anticipated”.
– RBI stops G-SAP bond buys, Governor Das said that need for undertaking further G-SAP operations does not arise. It will, however, continue to conduct open market operations as needed.
– All new payment acceptance infrastructure, including PoS machines and QR codes, to be geo-tagged
-Ceiling for transactions via IMPS has been raised from Rs 2 lakh to Rs 5 lakh.
– SLTR auctions for small finance banks will continue beyond the original deadline of October 2021 to December 2021.
– “With the worst of the second wave behind us and substantial pick-up in COVID19 vaccination giving greater confidence to open up and normalise economic activity, the recovery of the Indian economy is gaining traction,” said Shaktikanta Das on Friday.
– Domestic economic activity is gaining traction with the ebbing of the second wave. Going forward, rural demand is likely to maintain its buoyancy, given the above normal kharif sowing while rabi prospects are bright, said the RBI Governor.
– After a prolonged slowdown, industrial production posted a high year-on-year growth for the fifth consecutive month in July. The manufacturing PMI at 53.7 in September remained in positive territory. Services activity gained ground with support from the pent-up demand for contact-intensive activities.
– Overall, aggregate demand is improving but slack still remains; output is still
below pre-pandemic level and the recovery remains uneven and dependent upon continued policy support, said Das.
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