RBI Monetary Policy Highlights: Lending Rates Unchanged, Growth Projected At 9.5%

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MPC Meet Live Updates: Reserve Bank kept the repo rates unchanged at four per cent

Reserve Bank of India (RBI) Governor Shaktikanta Das announced the policy decision today, at the end of the scheduled review of the Monetary Policy Committee (MPC) that began on Wednesday, June 2, as it evaluates the economic impact amid the severity of the second wave of COVID-19. The Reserve Bank’s monetary policy unanimously voted to maintain the repo rates – the key interest rates at which the RBI lends money to commercial banks – steady at four per cent. The reverse repo rate – the rate at which RBI borrows money from banks, was also unchanged at 3.35 per cent. (Also Read: RBI Keeps Lending Rate At 4%, Projects Real GDP Growth This Year At 9.5% )

The central bank has maintained its status quo on key policy rates for the sixth time in a row, continuing with the accommodative stance as long as necessary to revive economic growth on a durable basis. The RBI targeted retail inflation at 5.1 per cent in the current financial year 2021-22.

The RBI Governor also announced the secondary market government securities acquisition programme – G-SAP 2.0 of Rs 1.2 lakh crore in the second quarter of the current fiscal year. The central bank also cut down the gross domestic product (GDP) growth projection for the current fiscal from 10.5 per cent to 9.5 per cent.

This is the second bi-monthly monetary policy review for the financial year 2021-22, at a time when the economy witnessed a record contraction of 7.3 per cent for the previous fiscal 2021, recording its worst-ever performance in over four decades. 

 Even as India has recorded around 2.8 crore COVID-19 cases since last year, and over 3 lakh casualties, some analysts believe that the worse may be over as states have begun cautious unlocking, amid initial signs that the peak of the second covid curve may have subsided.

Here are highlights from today’s RBI Governor Shaktikanta Das-led Monetary Policy Committee meeting:

MPC Meet Live: Need adequate fiscal support to jump-start consumption demand: Analysts
”Measures to enhance liquidity support to most vulnerable touch sensitive sectors and small businesses; and expanded credit exposure limit for resolution is a great move. As the nation attempts to recover from the second wave of pandemic, there is a dire need to provide monetary policy support – on account of both easy availability and lower cost of funds – to households and businesses alike. 

Besides the monetary policy intervention, as we come out of graded regional lockdowns and further resume economic activities, there is a greater need to provide adequate fiscal support to jump start consumption demand. Demand stimulant measure like credit subsidy or tax waivers even for a limited period can play a transformative role until we reach the pre COVID-19 normalcy thresholds,” said Mr. Shishir Baijal, Chairman & Managing Director, Knight Frank India.

RBI Monetary Policy LIVE: Banking shares decline after RBI maintains status quo on lending rates

On Friday, June 4, the rate-sensitive banking shares such as ICICI Bank, HDFC Bank, Axis Bank, State Bank of India slipped around one per cent each in a subdued market after the Reserve Bank of India (RBI) maintained status quo on interest rates during the second bi-monthly monetary policy decision of fiscal 2022.

MPC Meet Live Updates: Authorized Dealer banks allowed to place margins on behalf of FPI clients

The Reserve Bank of India took steps to encourage investments by Foreign Portfolio Investors (FPIs) in the Indian debt market. In order to ease operational constraints faced by FPIs, RBI has now permitted authorized dealer banks to place margins on behalf of their FPI clients for their transactions in government securities, including state development loans as well as treasury bills, within the credit risk management framework of banks.

RBI Monetary Policy LIVE: G-SAP to ensure lower sovereign risk premia: Experts

“RBI’s bigger move was with regards to yield management as the RBI stressed on smooth liquidity management and orderly G-sec borrowings, with a more vocal and defined G-SAP. Of the residual Rs 400 bn G-SAP 1.0 , around Rs 100 bn will be allocated to SDLs, while the G-SAP 2.0 amount will be higher at Rs 1.2 tn for 2QFY21. This would further ensure lower sovereign risk premia ahead amid elevated borrowing calendar this year,” said Ms. Madhavi Arora, Lead Economist, Emkay Global Financial Services

RBI Monetary Policy LIVE: NACH to be available on all days of the week

The National Automated Clearing House or NACH, a bulk payment system operated by the NPCI, facilitates the one-to-many credit transfers such as payment of dividend, interest, salary, pension, etc., as also the collection of payments pertaining to electricity, gas, telephone, water, periodic instalments towards loans, investments in mutual funds, insurance premium, etc. The RBI has now leveraged the 24×7 availability of RTGS, NACH which is currently available on bank working days, to be made available on all days of the week, with effect from August 1, 2021.

RBI Monetary Policy LIVE: Enhancement of Exposure Thresholds under Resolution Framework 2.0

The Resolution Framework 2.0 was announced by the Reserve Bank on May 5, 2021, provides for resolution of COVID-19 related stress of MSMEs as well as non MSME small businesses, and loans to individuals for business purposes. In order to enable a larger set of borrowers to avail of the benefits under Resolution Framework 2.0, RBI decided to expand the coverage of borrowers under the scheme by enhancing the maximum aggregate exposure threshold from Rs 25 crore to

Rs 50 crore.

RBI Monetary Policy LIVE: RBI Governor Shaktikanta Das To Address Post-Policy Press Conference
RBI Governor Shaktikanta Das will address a post-policy press conference at 12 noon today. He will address queries related to the bi-monthly Monetary Policy Committee decisions taken today and other key decisions announced by the authority.

RBI Monetary Policy LIVE: Sector-specific approach to provide liquidity will ensure recover: Experts

”The RBI expectedly stayed the course and kept key policy rates and policy stance unchanged. The GSAP 2.0 bond-buying program worth Rs 1.2 lakh crore will ensure system liquidity and smooth government borrowing for the current financial year.

The central bank’s focus on growth, assuring proactive, preemptive policy support till growth stabilizes will positively impact the market sentiment. The sector-specific approach to provide liquidity support from healthcare to hospitality will ensure a quick recovery, arrest job losses in the affected sectors. Raising the limit for MSME loan restructuring is a big positive given the impact the sector has on the broader economy,” said Mr. Nish Bhatt, Founder & CEO, Millwood Kane International – an Investment consulting firm.

MPC Meet Live Updates: India’s forex reserves touched $598 billion-mark

RBI Governor Shaktikanta Das aid India’s forex reserves may have crossed record level of $ 600 billion on the back of robust capital flows. As per the RBI’s data issued on May 28, the country’s foreign exchange reserves rose to $ 2.865 billion to a record high of $ 592.894 billion for the week ended May 21, driven by gold and currency assets.

RBI Monetary Policy LIVE: RBI Announces Special Liquidity Facility to SIDBI

The Reserve Bank of India extended a fresh support of Rs 50,000 crore on April 7, 2021 to All India Financial Institutions (AIFIs) for new lending in 2021-22. This included Rs 15,000 crore to the Small Industries Development Bank of India (SIDBI). In order to support the funding requirements of micro, small and medium enterprises (MSMEs), the RBI decided to extend a special liquidity facility of Rs 16,000 crore to SIDBI for on-lending or refinancing through models and structures.

MPC Meet Live Updates: Markets could be disappointed with last tranche of G-SAP 1.0: Experts

“The announcements on policy rates, stance, and liquidity management was as per expected. The announcements on G-SAP 1.0 and G-SAP 2.0 are in line expectations too. Markets could be slightly disappointed with the last tranche of GSAP 1.0  including SDL within the Rs400 bn limit, especially, after the announcement of a possible Rs 1.58 tn borrowing by center as back-to-back loans to the states. However, this would be a policy that is in line with market’s expectations,” said Suvodeep Rakshit, Vice President & Senior Economist at Kotak Institutional Equities.

RBI Monetary Policy LIVE: RBI to purchase G-Sec worth Rs 40,000 under GSAP 1.0 Programme
Under the G-SAP 1.0 programme, the Reserve Bank of India will purchase the remaining Rs 40,000 crore worth of government securities on June 17. RBI Governor Shaktikanta Das in the policy meet, said that out of this, Rs 10,000 crore would constitute purchase of state development loans or SDLs.

MPC Meet Live Updates: Support from RBI is likely to ease the SDL yields marginally: Experts

“The policy statement has been in line with our expectations with RBI having revised down its GDP forecasts while providing assistance to the stressed sectors. The RBI also has revised the inflation trajectory marginally higher given the concerns on pass through of higher input prices.

Given that SDL purchases are also included in the last tranche of GSAP 1.0, suggesting a similar inculsion in GSAP 2.0, it may be marginally negative for the G-sec markets  given that a higher purchase was expected in order to offset the supply concerns emanating from the higher G-sec issuance expected to meet the GST compensation cess shortfall to the states. Needless to say the pressure on states’ finances is increasing and hence the support from RBI is likely to ease the SDL yields marginally,” said Upasna Bhardwaj, Senior Economist at Kotak Mahindra Bank.

 

RBI Monetary Policy LIVE: RBI cuts down quarterly GDP estimates for fiscal 2021-22
RBI Governor Shaktikana Das said that GDP growth is now projected at 9.5 per cent in current financial year 2021-22. The central bank projected GDP growth of18.5 per cent in the first quarter, 7.9 per cent in the second quarter, 7.2 per cent in the third quarter; and 6.6 per cent in the fourth quarter of current fiscal

MPC Meet Live Updates: RBI Announces G-SAP 2.0 Programme

The Reserve Bank has decided to undertake the G-SAP 2.0 in the second quarter of this financial year and conduct secondary market purchase operations of Rs 1.2 lakh crore to support the market.

RBI Monetary Policy LIVE: RBI opens Special liquidity window of Rs 15,000 crore
RBI Governor while addressing the policy meet, said that the central bank will open a special liquidity window of Rs 15,000 crore till March 30, 2022, with tenors of up to three years at the repo rate. Under this banks can provide lending support to hotels, restaurants, travel firms, aviation ancillary services and other services that include private bus operators, car repair services, spa, as well as saloons.

MPC Meet Live Updates: RBI to conduct G-SAP 1.0 on June 17

RBI Governor Shaktikanta Das said that the RBI will conduct operations for the remaining Rs 40,000 crore under GSAP 1.0 on June 17.

RBI Monetary Policy LIVE: RBI Cuts Down GDP Growth To 9.5% For Fiscal 2021-22

In the Monetary Policy Committee meet, the Reserve Bank of India trimmed the gross domestic product (GDP) growth projections for the financial year 2021-22 from 10.5 per cent to 9.5 per cent

MPC Meet Live Updates: RBI projects retail inflation at 5.1% for fiscal 2021-22

The Reserve Bank of India projected the retail inflation at 5.1% for fiscal year 2021-22. The central bank projected inflation for first quarter at 5.2 per cent, 5.4 per cent in second quarter, 4.7 per cent in third quarter, and at 5.3 per cent in the fourth quarter in the current financial year.

RBI Monetary Policy LIVE: Shaktikanta Das says global economy to assist recovery

RBI Governor Shaktikanta Das explained that the resilience of the agri, forecast of monsoon, and the gathering momentum of the global economy could help the domestic economy as the second wave of the pandemic tapers.

RBI Monetary Policy LIVE: Reserve Bank Maintains Accommodative Stance
Shaktikanta Das-led Monetary Policy Committee has maintained its accommodative stance in an effort to continue supporting the revival of the economy amid the COVID-19 crisis.

RBI Monetary Policy LIVE: Monetary Policy Committee Keeps Lending Rates Unchanged
The Reserve Bank’s monetary policy maintained the repo rates – the key interest rates at which the RBI lends money to commercial banks – steady at four per cent. The reverse repo rate – the rate at which RBI borrows money from banks, was also unchanged at 3.35 per cent.

RBI Monetary Policy LIVE: RBI Governor Shaktikanta Das begins monetary policy address
RBI Governor Shaktikanta Das began addressing the monetary policy statement at 10:00 am on Friday, June 4. A post policy press conference will be telecast at 12:00 noon today

RBI Monetary Policy LIVE Updates: Economy in vulnerable condition and requires policy support: Experts

“With the second wave of COVID – 19 that has brought about a new phase of economic uncertainties, we expect RBI to remain growth supportive and leave the policy interest rates unchanged in the upcoming policy. While rise in commodity prices have been exerting an upward pressure on input material cost and on margins, the Central Bank at the current juncture should not risk increasing the borrowing cost. With the second wave of the pandemic, economy is in a vulnerable condition and would require further policy support from the Central Bank and the Government,” said Mr. Shishir Baijal, Chairman & Managing Director, Knight Frank India.

RBI Monetary Policy LIVE Updates: Banking Stocks In Focus Today
The shares of private banks and PSU are likely to be focus today amid market hours, as the Reserve Bank announced key decisions on interest rates, liquidity measures. Ahead of the policy announcement, the stock markets opened on a cautious note. At 9:53, the BSE Sensex was trading 52,278.05 higher by 19 points

RBI Monetary Policy LIVE Updates: Traders await decisions under G-SAP 2.0
The Reserve Bank of India, in its first bi-monthly meeting for the current fiscal, committed to buying Rs 1 lakh crore ($13.71 billion) worth of government bonds from the market between April-May in a quantitative easing program it called G-SAP 1.0. Traders now look to see whether the central bank will announce potentially more aggressive bond purchases under a G-SAP 2.0 programme, and are also eyeing any revisions to growth and inflation forecasts. The market expectations for larger bond-buying are high after the government recently increased its borrowing for this year.

RBI Monetary Policy LIVE Updates: Expect policy stance to remain unequivocally accommodative: Experts

”The current focus of the MPC is to support the fragile economy and the financial system from the damage inflicted by the second wave of Covid and to bring it back again on a healthy recovery path over the next few quarters…There is a need to pursue a similar monetary and fiscal policy framework over the next 2-3 quarters as we witness the tapering of the second Covid wave. We expect the policy stance to remain unequivocally accommodative throughout the current financial year. 

While there is virtually no scope for a further cut in interest rates given the increased commodity prices and the rising WPI, the status quo on rates is likely to continue for a longer time possibly till the end of FY22. Despite the risks of a build up of inflationary pressures in the near term, RBI is likely to give higher priority to the concerns around growth recovery,” said Suman Chowdhury, Chief Analytical Officer, Acuité Ratings & Research.

RBI Monetary Policy LIVE Updates: GDP growth retained at 10.5% in last meeting
In the last bi-monthly meet held in April, the central bank expected the gross domestic product (GDP) growth to be at 10.5 per cent in fiscal 2021-22. The real GDP growth was projected at 22.6 per cent in first quarter of current fiscal, 8.3 per cent in second quarter, 5.4 per cent in third quarter, and 6.2 per cent in the fourth quarter

RBI Monetary Policy LIVE Updates: ‘It will be key to see if RBI suggests changes to growth forecast’: Experts

“While policy rates are likely to be unchanged, it will be key to see if RBI MPC suggests any changes to growth forecast. Q1 FY 22 so far has been muted given the pandemic and resultant localised lockdowns. Bond markets would also be eager to see GSAP 2.0 announcement for Jul- Sep quarter, as government bond supply may not be met with commensurate demand. Bottomline, despite inaction on rates front, walk the talk will be key to market movement post policy,” said Lakshmi Iyer, CIO (Debt) & Head Products, Kotak Mutual Fund

RBI Monetary Policy LIVE Updates: RBI May keep key lending rates unchanged
In a recent poll by news agency Reuters, all 51 economists who took part in the survey said that the central bank is likely to keep interest rates at record lows, as it assesses the economic crisis amid the second wave of the COVID-19 pandemic. However, the monetary authority is expected to reiterate its commitment on liquidity. 

RBI Monetary Policy LIVE Updates: RBI Governor To Deliver Monetary Policy Address At 10:00 AM
Reserve Bank of India (RBI) Governor Shaktikanta Das will deliver the Monetary Policy review statement at 10:00 am today (June 4, 2021). The central bank Governor will also address a post-policy press conference at 12 noon.

RBI Monetary Policy LIVE: RBI Monetary Policy Decision Today
Reserve Bank of India (RBI) Governor Shaktikanta Das will announce the second bi-monthly Monetary Policy Committee (MPC) statement of the financial year 2021-22 today 



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