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finance | IST

RBI Monetary Policy Highlights: Central bank doles out more liquidity, eases home loans rules

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The Reserve Bank of India's (RBI) revamped Monetary Policy Committee (MPC) kept the repo rate unchanged in the October policy.

The Reserve Bank of India's (RBI) revamped Monetary Policy Committee (MPC) kept the repo rate unchanged in the October policy. With no change this time as well, the repo rate currently stands at 4 percent. The reverse repo rate has been maintained at 3.35 percent.
The MPC voted unanimously to keep policy rates unchanged. The central bank has maintained its policy stance at “accommodative” which could continue for as long as necessary to revive growth
In RBI's first GDP estimate for FY21, governor Shaktikanta Das said that the number is likely to contract by 9.5 percent in the year. Global economic activity has rebounded in Q2, but unevenly among countries, he said.
On inflation, Das said inflation will ease closer to target by Q4 FY21. Inflation since March 2020 levels has remained elevated and will remain elevated in Sept as well, as per Das. "MPC has decided to look through the current inflation as a transient hump," said Das.
Here are the key RBI highlights on developmental and regulatory policies:
On-Tap TLTRO
1. RBI proposes on-tap TLTRO with tenor of upto 3 years
2. RBI will target specific sectors that have multiplier effects on growth
3. Will conduct Rs 1 lakh crore of TLTRO at a floating-rate linked to repo rate
4. TLTRO scheme will be available until March 2021
5. Banks can deploy TLTRO money in corporate bonds, commercial papers, NCDs issued by companies in specific sectors
6. Banks can use TLTRO funds to extend loans to these sectors
SLR Holdings in Held to Maturity (HTM) category
1. Extends dispensation of enhanced HTM limits 22 percent upto March 31, 2022
2. Dispensation for securities acquired between September 1, 2020 and March 31, 2021
Open Market operations (OMOs) in State Developments Loans (SDLs)
1. RBI to conduct OMOs in State Developments Loans (SDLs)
2. Move to improve liquidity and facilitate efficient pricing
Regulatory Retail Portfolio – Revised Limit for Risk Weight
1. Max aggregate retail exposure to one counterparty increased to Rs 7.5 crore from Rs 5 crore
2. Increase in limit for individuals & small borrowers with turnover upto Rs 50 crore
3. Risk weight in the category to remain at 75 percent instead of 100 percent
Individual Housing Loans – Rationalisation of Risk Weights
1. To rationalise the risk weights by linking them only with LTV ratios for all new housing loans
2. Rules for loans sanctioned up to March 31, 2022
3. Such loans will attract a risk weight of 35 percent where LTV is <=80 percent
4. Risk weight of 50 percent to apply where LTV is >80 percent or <=90 percent
Review of the Co-origination Model
1. Co-origination of loans extended to all the NBFCs (including HFCs)​