New Delhi: The Reserve Bank of India, maintaining its accommodative stance amid rising COVID cases, kept its rates unchanged on Wednesday. RBI kept its repo rate unchanged at 4 per cent, reverse repo rate also stands at 3.35 per cent. In its Monetary policy Committee meeting, Shaktikanta Das, Governor, Reserve Bank of India added that the focus of the economy is to sustain growth and the central bank will remain accommodative as long as necessary.
“The MPC voted unanimously to leave the policy repo rate unchanged at 4 per cent. It also unanimously decided to continue with the accommodative stance as long as necessary to sustain growth on a durable basis and continue to mitigate the impact of COVID-19 on the economy, while ensuring that inflation remains within the target going forward. The marginal standing facility (MSF) rate and the bank rate remain unchanged at 4.25 per cent. The reverse repo rate stands unchanged at 3.35 per cent,” Das said.
The RBI has projected the GDP growth at 10.5 per cent in financial year 2021-22, meanwhile inflation is projected to reach 5 per cent in fourth quarter of FY 2021, inflation in the first half of FY 2022 is projected at 5.2 per cent which will go down to 4.4 per cent in the thirds quarter and rise to 5.1 per cent in the last quarter (Q4) of FY 2022.
The central bank added that the recent surge in COVID cases can dampen the gains earned by the economy so far, therefore a close look at change in demand conditions in the economy is needed.
“Prospects for 2021-22 have strengthened with the progress of the vaccination programme. The recent surge in infections has, however, imparted greater uncertainty to the outlook and needs to be closely watched, especially as localised and regional lockdowns could dampen the recent improvement in demand conditions and delay the return of normalcy. Against this backdrop, the MPC judged that monetary policy should remain accommodative to support and nurture the recovery”, he said.
In the domestic economy, RBI added that the focus must now be on containing the spread of the virus as well as on economic revival – consolidating the gains achieved so far and sustaining the impulses of growth in the new financial year (2021-22).
“A key aspect of this strategy will be to strengthen the bedrock of macroeconomic stability that has anchored India’s revival from the pandemic. This will help stakeholders in taking efficient spending decisions over longer horizons, thereby improving the investment climate,” RBI governor said.
Other Key points
On this backdrop, RBI plans to ensure ample liquidity in system so that productive sectors get adequate credit. Das also added that the secondary market G-Sec acquisition program for Rs 1 lakh crore will be put in place for Q1 of FY22, where the first purchase of Rs 25,000 crore will be done on April 15 under G-SAP.
The Central Bank has doubled the maximum end-of-day balance for payment banks to Rs 2 lakh. In other announcements, Das added that Targeted Long Term Repo Operations (TLTRO) scheme has being extended by 6 months, up to September 30, 2021. Liquidity support of Rs 50,000 crores for fresh lending will be provided in 2021. These will include:
– Rs 25,000 crore to NABARAD
– Rs 10,000 crore to NHB
– Rs 15,000 crore to SIDBI
The RBI announced that it will enhance the Ways and Means Advances (WMA) to up to Rs 47,010 crore, which is an increase of 46 per cent from the current limit of Rs 32,225 crore. The WMAs are temporary advances given by the Central Bank to the Centre to cover mismatches in receipts and payments.