RBI Monetary Policy: Top 10 Takeaways 
Shaktikanta Das, governor of the Reserve Bank of India. (Photographer: Dhiraj Singh/Bloomberg)

RBI Monetary Policy: Top 10 Takeaways 

Within days of the Union Budget 2021 presentation, the Monetary Policy Committee met and decided to keep key interest rates unchanged. These are the key takeaways from the MPC resolution and announcements made alongside by the Reserve Bank of India.

Policy Rates Unchanged

The Monetary Policy Committee voted unanimously to keep the repo rate unchanged at 4% for the fourth straight meet since May. The central bank that controls the reverse repo rate separately decided to keep it unchanged at 3.35%.

Read more here.

CRR Normalisation In Two Steps

While keeping rates unchanged, the RBI decided to reverse the Cash Reserve Ratio cut announced in March 2020 after the Covid-19 crisis hit. RBI Governor Shaktikanta Das said the normalisation of CRR will leave space for the central bank to put other liquidity management tools to work.

Read more here.

Direct Investment In Government Bonds

Retail investors will now have greater access to the government bond market via a new direct investment option being offered by the central bank.

Read more here.

NBFCs Included In TLTRO

The Reserve Bank of India will allow banks to extend credit to non-banking finance companies under the targeted long-term repo operations scheme. This will help provide liquidity to NBFCs.

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RBI Projects FY22 Real GDP At 10.5%, CPI Inflation At 5.2% In Q4 FY21

Growth is recovering, and the outlook has improved significantly with the rollout of the vaccine programme in the country, the Monetary Policy resolution said. The recovery, however, is still to gather firm traction and hence continued policy support is crucial.

In its resolution, the MPC said the sharp correction in food prices has improved the food price outlook, but some pressures persist, and core inflation remains elevated. An unwinding of taxes on petroleum products by both the centre and states could ease the cost push pressures with pump prices of petrol and diesel at historic highs.

Read more.

Also read: Bonds in India Sell Off as RBI’s Support Measures Disappoint

Key highlights from the the RBI Governor’s media conference.

Central Bank Digital Currency

Digital currency is a work in progress at the RBI, said Governor Das. Elaborating on that, RBI Deputy Governor BP Kanungo said a digital currency is still on the drawing board. You will hear from RBI very soon on digital currency, he added.

New Bill To Ban All Cryptocurrencies Except Official Digital Currency By RBI

Bad Bank

The RBI has held discussions with government on bad bank. It is awaiting a formal proposal from government on bad bank and will examine such proposal and come up with views.

How India Finally Got Around to Starting a ‘Bad Bank’

AQR 2.0

The Economic Survey had last week recommended a second asset quality review of banks. Responding to a question on whether the RBI was considering this, Das said the regulator was already doing an independent assessment of the actual state of non performing assets that banks have as part of the supervisory process. Impact of the standstill on asset classification and that of Covid-related resolution process is constantly being shared with RBI, he said.

Economic Survey 2021 Calls For Fresh Asset Quality Review Of Banks After Covid

PMC Bank

The governor reiterated that three proposals have been received and they are currently under consideration.

PMC Bank: Is Resolution Really In Sight?

NBFC Regulation

The RBI had recently published a discussion paper on NBFC regulation. When asked about the timeline for a new regulatory architecture, Das said a decision will be taken once comments are received and considered.

RBI Discussion Paper Suggests Bank-Like Regulation For Top 25-30 NBFCs

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