• MPC voted unanimously to leave policy repo rate unchanged at 4%
  • To continue accommodative stance as long as necessary till into next fiscal year to revive growth on durable basis
  • Reverse repo, MSF and Bank Rate unchanged at 3.35% and 4.25%, respectively.
 "The MPC is of the view that inflation is likely to remain elevated, barring transient relief in the winter months from prices of perishables. This constrains monetary policy at the current juncture from using the space available to act in support of growth," said RBI Governor Shaktikanta Das in a video conference, adding, "Monetary policy will monitor closely all threats to price stability to anchor broader macroeconomic and financial stability. Accordingly, the MPC in its meeting today decided to maintain status quo on the policy rate and continue with the accommodative stance as long as necessary – at least during the current financial year and into the next financial year – to revive growth on a durable basis and mitigate the impact of COVID-19 on the economy, while ensuring that inflation remains within the target going forward." 
  • The MPC view is inflation to remain elevated, with some relief in the winter months 
  • Inflation constrains monetary policy at the current junction
  • The outlook for inflation has turned adverse relative to expectations in the last two months
  • There is substantial wedge between wholesale and retail inflation due to supply-side bottlenecks and large margins being charged to the consumer
  • Cost-push pressures continue to impinge on core inflation
  • CPI inflation is projected at 6.8% for Q3:2020-21, 5.8% for Q4:2020-21; and 5.2-4.6% in H12021-22, with risks broadly balanced 
  • Rural demand expected to strengthen further; Urban demand too gaining momentum
  • Consumers remain optimistic about the outlook, and business sentiment of manufacturing firms is gradually improving
  • Private investment is still slack and capacity utilisation has not fully recovered.
  • Exports are on an uneven recovery, but prospects have brightened with progress on vaccine
  • Real GDP growth in 2020-21 is expected to be negative at (-)7.5% verus (-)9.5% projected in October policy.
  • Real GDP projected at (+)0.1% in Q3FY21 versus (-)5.6% projected in October policy; Similarly (+)0.7% growth is projected in Q4FY21 versus 0.5% projected in October policy. 
  • Real GDP growth projected at (+)21.9-6.5% in H12021-22
  • Extension of on-tap TLTRO with tenors of upto 3 years with total amount of Rs 1 lakh crore at a floating rate linked to repo rate to 26 stressed sectors identified by the Kamath Committee. 
  • To extend the LAF and MSF facility to regional rural banks (RRB)
  • RRB can also participate in call/notice money market as both borrower and lender
  • RBI to continue using instruments like OMO purchases, operation twists and reverse repos.
  • RBI proposes to allow availability of RTGS facility on all days of the year.
  • Commercial and cooperative banks to retain profit earned in 2019-20; Not to make any dividend payment.
  • To formulate norms regarding distribution of dividend by NBFCs
  • To revise regulatory framework for NBFCs
  • To put in place comprehensive norm to enhance disclosures on banks’ customers complains 
  • To review CDS guidelines
  • To review comprehensive guidelines on derivatives, money market directions
  • To allow banks to write-off of unrealised export bills up to a certain limit
  • To permit banks to allow Indian companies to set-off their export receivables against import payables either on net basis or gross 
Policy Analytics, Eforex India