Wednesday, 7 April 2021

Highlights of Monetary Policy Statement – Resolution of the MPC, April 5 to 7, 2021

 


 

  • Maintains “accommodative” policy stances as long as it is 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.
  • Repo rate remained unchanged at 4.00 per cent.
  • Accordingly, reverse repo under the liquidity adjustment facility remains unchanged at 3.35 per cent and the marginal standing facility (MSF) rate and the Bank Rate at 4.25 per cent.
  • CPI inflation is projected as 5.0 per cent in Q4:2020-21; 5.2 per cent in Q1:2021-22, 5.2 per cent in Q2, 4.4 per cent in Q3 and 5.1 per cent in Q4, with risks broadly balanced. Medium-term target for consumer price index (CPI) inflation remains at 4 per cent within a band of +/- 2 per cent, while supporting growth.
  • Real GDP growth for 2021-22 is retained at 10.5 per cent consisting of 26.2 per cent in Q1, 8.3 per cent in Q2, 5.4 per cent in Q3 and 6.2 per cent in Q4.
  • RBI has announced G-sec acquisition programme (G-SAP). Under the programme, the RBI will commit upfront to a specific amount of open market purchases of government securities. For Q1 of 2021-22 it has been decided to announce a G-SAP of Rs.1 lakh crore. The first purchase of government securities for an aggregate amount of ₹25,000 crore under G-SAP 1.0 will be conducted on April 15, 2021.
  • Targeted Long-Term Repo Operations (TLTRO) on Tap scheme has been extended by a period of 6 months, i.e. till September 30, 2021.
  • In consonance with the policy objective of nurturing the still nascent growth impulses, it has been decided to extend fresh support of Rs. 50,000 crore to the all India financial institutions (AIFIs) for new lending in 2021-22 – Special liquidity facility of Rs. 25,000 to be provided to NABARD, Rs. 10,000 crs to NHB and Rs. 15,000 crs to MSMEs.
  • Enhancement of limit of maximum balance per customer at end of the day from ₹1 lakh to ₹2 lakh for Payments Banks.
  • Priority Sector Lending (PSL) classification for lending by banks to NBFCs for ‘on-lending’ to the Agriculture/MSME/Housing sectors has been extended for six months, i.e. up to September 30, 2021.
  • The RBI has accepted both the recommendations of advisory committee set up to review Way and Means Advances (WMA) limits for the State Governments/UTs. The Committee has recommended an overall revised limit of ₹47,010 crore for all states, as against the current limit of ₹32,225 crore (fixed in February 2016), and  continuation of the enhanced interim WMA limit of ₹ 51,560 crore.
  • Unutilised External Commercial Borrowings (ECB) proceeds drawn down on or before March 1, 2020 can be parked in term deposits with AD Category-I banks in India prospectively up to March 1, 2022.

(Source: www.rbi.org.in)


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