The Reserve Bank of India (RBI) on June 4 kept its key lending rate i.e repo rate unchanged, as widely predicted, at 4% for the sixth consecutive policy. The real gross domestic product (GDP) for the financial year FY22 is projected at 9.5%, RBI governor Shaktikanta Das announced.
Given that the nation is reeling under the impact of the second COVID-19 wave, the Monetary Policy Committee (MPC) of the Reserve Bank of India unanimously voted to maintain the status quo on policy rates and decided to continue with an accommodative stance to revive and sustain growth on a sustainable basis.
Here are the key highlights from the Monetary Policy statement of the RBI Governor
*RBI has left the reverse repo rate unchanged at 3.35%
*A normal monsoon will provide a tailwind for economic revival, says RBI Governor Shaktikanta Das
*According to the RBI governor, unlike the first wave, the impact of the second COVID-19 wave on economic activity is expected to be relatively contained as people and businesses are adapting to the changing conditions.
*Recent fall in inflation provides elbow room, policy support from all sides required to regain growth momentum, the governor said.
*The governor said domestic monetary and financial conditions remained highly accommodative and supportive. The rebound in global trade is taking hold which should support India's global sector, he added.
*RBI cuts economic growth forecast for current fiscal to 9.5% from previous 10.5%
*The spread of COVID-19 in rural areas and dent in demand pose downside risks to growth, Das said.
*Retail inflation is projected at 5.1% in 2021-22
*The governor said that the rising trajectory of global commodity prices is worsening price concerns
*RBI will buy Rs 40,000 crore of government securities on June 17; Rs 1.20 lakh cr G-Sec to be purchased in Q2, the governor said.
*Consumer Price Index (CPI) inflation is projected at 5.1% for FY22. Giving the breakup, Das said, the CPI inflation is expected at 18.5% in Q1, at 7.9% in Q2, 7.2% in Q3, and 6.6% in Q4.
*Government Securities Acquisition Programme (G-SAP) 2.0 will be taken in the second quarter of 2021-22 worth Rs 1.2 lakh crore to support the market
*The external conducive conditions are forming for a durable recovery and now is the time to give a further push to stability, Das assured. Rural demand is expected to remain strong going ahead, he added.
*Das asserted that the focus of RBI is turning to equitable distribution of liquidity now and that the central bank will continue with proactive and pre-emptive liquidity support.
*RBI will extend a special liquidity facility (SLF) of Rs 16,000 crore to the Small Industries Development Bank of India (SIDBI) to refinance through novel models, structures. The SLF of Rs 16,000 crore via SIDBI will be available at the prevailing repo rate.
*The RBI has provided additional relief measures for the on-tap liquidity window for contact intensive sectors. A liquidity window of Rs 15,000 crore is opened until March 31, 2022, with a 3-year tenor at repo rate. Under this, banks can provide fresh lending support to travel, tourism, aviation, ancillary, and other services like private bus operators, etc. Banks will be permitted to park surplus to the extent of loan book for contact intensive sectors at 40 bps higher than reverse rate.
*Resolution Framework 2.0 has been expanded to include borrowers with exposures of up to Rs 50 crore vs Rs 25 crore earlier.
*In order to further enhance customer convenience, the National Automated Clearing House (NACH) payment system will be made available on all days of the week with effect from August 1, 2021.