RBI Governor Shaktikanta Das announced the decisions of the Monetary Policy Committee (MPC) today that has decided to keep interest rates unchanged. It has maintained the policy stance at “accommodative” amid high inflation and some signs of economic recovery. The MPC made a unanimous decision to keep the repo rate steady at 4 per cent and the reverse repo rate steady at 3.35 per cent. Das said the MPC will maintain the accommodative stance “for as long as necessary.” “CPI inflation is seen at 6.8 per cent for Q3FY21 and projected CPI inflation is at 5.8 per cent for Q4FY21. For H1FY22, projected CPI inflation is seen at 5.2-4.6 per cent with risks broadly balanced,” Das said, meaning inflation is likely to remain elevated with some relief in the winter months.
“Projection for H2FY21 is positive +0.1 per cent for Q3 against -5.6 per cent earlier and +0.7 per cent for Q4 against +0.5 per cent earlier. Real GDP growth for FY21 projected at -7.5 per cent.”
He pointed out that the bond market conditions have evolved in an orderly manner overall. RBI is ready to undertake further measures to assume market access to liquidity. “RBI is taking measures to reduce volatility, we will continue to respond to global spillovers to secure domestic stability with our liquidity management operations. We will use various instruments appropriately to ensure ample liquidity,” he said. It was also announced that the money transfer tool RTGS facility will be made 24×7, “Settlement of AMPS, NFS, Rupay and UPI transactions will be allowed all days of the week against earlier five days of the week,” said Das.
It was also stated that the rural economy appears to be resilient and that the Central Bank is keeping a close eye on the country’s financial system. “Government borrowings have been smooth so far and corporate bond spreads have narrowed to pre-pandemic levels. RBI’s role as debt manager and banker to the government was tested to the hilt. Nascent signs of recovery are visible in H2FY21.” “Near-term financial stability risks have been contained. Portfolio flows into emerging markets have recovered. RBI seeks to quickly recoup employment and output losses. We remain strongly committed to preserving the stability of the financial sector,” said Das. He also mentioned that the RBI will put criteria for declaration of dividends for NBFCs and their regulatory regime will be reviewed to take a scale-based approach. “The current regulatory regime of the NBFC sector warrants a review.” “For the overall financial sector, the RBI will introduce risk-based internal audits in large urban co-operative banks and NBFCs. The RBI will also issue ‘Digital Payments Security Control Directions’. We will also form a comprehensive mechanism for complaints against lenders,” he said.