RBI's August 2021 Monetary Policy
MPC vote unanimously to keep repo rate unchanged at 4%
MPC voted 5 to 1 majority to continue with accommodative stance as long as necessary to mitigate the impact of COVID-19 on the economy
Reverse repo rate stands at 3.35%; MSF and Bank rate at 4.25%
India is in a much better position than at the time of MPC’s June meeting
We should not drop our guard and should remain vigilant against possibility of a third wave
Economic activities have broadly evolved on the lines of MPC’s views
monsoon has revived after a brief hiatus and kharif sowing is gaining momentum
Our expectation is that activity is likely to gather pace with progressive up-scaling of vaccinations, continued large policy support, buoyant exports, better adaptations to COVID-related protocols, and benign monetary and financial conditions.
The minutes of the MPC’s meeting will be published on Aug 20, 2021.
The next meeting of the MPC is scheduled during Oct 6 to 8, 2021
Aggregate demand is improving, but underlying conditions are still weak
Aggregate supply is also lagging below pre-pandemic levels
More needs to be done to restore supply-demand balance in a number of sectors of the economy
High frequency indicators suggests consumption, investment, external demand are all regaining traction
Though investment demand is still anaemic, govt economic package will kick-start a long-awaited revival.
Real GDP growth projection is retained at 9.5% in 2021-22 consisting of 21.4% in Q1 vs 18.5% in June policy; 7.3% in Q2 vs 7.9% in June; 6.3% in Q3 vs 7.2% in June; and 6.1% in Q4 versus 6.6% in projected in June policy.
Real GDP growth for Q1 FY23 is projected at 17.2%
Recent inflationary pressures are evoking concerns
June CPI was above the upper tolerance level, but price momentum moderated
In June, Core inflation softened from its peak in May
The supply-side drivers could be transitory while demand-pull pressures remain inert, given the slack in the economy.
CPI inflation is projected at 5.7% in FY22 versus 5.1% projected in June policy: 5.9% for Q2 vs 5.4% in June policy; 5.3% in Q3 vs 4.7% in June; and 5.8% in Q4 vs 5.3% in June policy of 2021-22, with risks broadly balanced.
CPI inflation for Q1 FY23 is projected at 5.1%
Financial stability remains a top priority for the RBI
The RBI via market operations, both conventional and unconventional, has maintained ample surplus liquidity to ensure easing of financial conditions in support of domestic demand
Given the sustained inflows, the RBI has absorbed a daily average of Rs 5.7 lakh cr in June, Rs 6.8 lakh cr in July and Rs 8.5 lakh cr in August
RBI conduct variable rate reverse repo auction of Rs 2.5 lakh cr on Aug 13, Rs 3 lakh cr on Aug 27; Rs 3.5 lakh cr on Sep 9 and Rs 4 lakh cr on Sep 24
These enhanced VRRR auctions should not be misread as a reversal of the accommodative policy stance, as the amount absorbed under the fixed rate reverse repo is expected to remain more than Rs 4.0 lakh crore at end-September 2021\par To conduct two more auctions of Rs 25,000 cr each on Aug 12 and Aug 26 under G-SAP 2.0
Will continue to conduct other operations like OMO, operation twist among other and calibrate them in line with evolving macroeconomic and financial condition. 
RBI further extends the operating period of on-tap liquidity window scheme by a period of three months, ie, till Dec 31. Under the scheme, RBI allowed on-tap finance of Rs 15,000 cr for certain contact-intensive sectors. Banks may provide lending support with tenor up to three years at the repo rate.
MSF extension till 31 Dec; increased access upto Rs 1.26 lakh crore
Transition from Libor: Guideline amendment export credit in foreign currency may be made in any other prevalent currency rate
Deferral of deadline to meet operational parameters for resolution plans -total debt to EBITDA ratio, current ratio, debt service coverage ratio, average debt service coverage ratio to Oct 1, 2022