Back

Highlights of MPC policy; RBI Das, Patra’s comments at press meet

Informist, Wednesday, Apr 7, 2021

MUMBAI – Following are the highlights of the First Bi-monthly Monetary Policy Committee Meeting of the Reserve Bank of India for 2021-22 (Apr-Mar):

KEY TAKEAWAYS
* MPC voted to leave repo rate unchanged at 4.00%
* Reverse repo rate left unchanged
* MPC voted to continue with accommodative stance
* Stance to be accommodative till recovery prospects well secured
* Recent surge in COVID cases must be closely watched
* COVID surge imparted greater uncertainty to outlook

* To release MPC Apr 5-7 meeting minutes on Apr 22

INFLATION
* CPI inflation path may be subject to upside, downside risks
* See CPI inflation at 5.0% in Jan-Mar
* See CPI inflation at 4.4% in Oct-Dec
* See CPI inflation at 5.2% in Apr-Jun
* See CPI inflation at 5.2% in Jul-Sep
* Food inflation trajectory to hinge on monsoon progress
* 4% CPI over medium term now successfully entrenched
* See CPI inflation at 5.1% in Jan-Mar 2022

GROWTH
* See FY22 GDP growth at 10.5%
* Government efforts, vaccination upside risks to GDP projections
* Policy should be accommodative to nurture, support growth
* Manufacturing firms optimistic of pick-up in demand in FY22
* Aim to strengthen bedrock of macro-economic stability
* Economic activity normalising despite surge in infections
* Record farm production to provide fillip to rural economy
* Rural demand remains buoyant, urban demand gained traction

FISCAL MATTERS
* To raise WMA limit for states to 470.10 bln rupees
* Enhanced 515.60-bln-rupee WMA limit for states to hold till Sep 30
* Spending on public infrastructure to be a force multiplier

FINANCIAL MARKETS
* To market: Can overcome challenges together, ensure recovery
* Liquidity ops to ensure orderly market conditions
* To hold variable rate reverse repos of longer maturities
* More reverse repos not to be seen as liquidity tightening
* To have secondary market gilt purchase programme in FY22
* To support market with adequate liquidity
* To buy 1-trln-rupee gilts via OMO Apr-Jun under new plan
* To commit upfront on certain amount of OMOs for FY22
* To ensure orderly evolution of yield curve
* Two-way bond yield movements shouldn't be abrupt, disruptive
* Urge market to heed our signals, actions in balanced manner
* Extend TLTRO on-tap scheme by six months up to Sep 30
* To buy 250 bln rupees of gilts via secondary market on Apr 15
* To buy gilts via secondary market G-Sec acquisition programme
 

FINANCIAL SECTOR
* To do whatever it takes to preserve financial stability
* To set up panel to review working of asset recast companies
* To provide 500 bln rupees as liquidity to NHB, NABARD, SIDBI
* To publish financial inclusion index in July every year
* Priority sector tag for NBFC loans extended till Sep 30
* To make interoperability mandatory for prepaid instruments
* Conditional OK to companies parking ECB proceeds with banks till Mar 1
* Hike limit on payments banks day-end balance to 200,000 rupees
* Prepaid instruments' outstanding balance cap now 200,000 rupees
* FX reserves at $577 bln as on Mar 31, up $99.2 bln on year 
* India's FX reserves as on Mar 31 covers 18.4 month import bill

==========================================================================

[I] Highlights of RBI Das, Patra's comments at post-policy press meet

MUMBAI – Following are the highlights of Reserve Bank of India Governor Shaktikanta Das and Deputy Governor Michael Patra's comments at a post-policy press conference today:

SHAKTIKANTA DAS
===============
* Our signals, actions, communication must be read together
* Gilt buy plan different from usual OMO calendar
* Gilt buy plan in addition to LAF, special OMO operations
* New gilt purchase plan is outside usual toolkit
* On FY22 government borrowing: See foreign investments come in
* Growth of paramount importance now while keeping CPI in mind
* MPC statement is clear on accommodation, gives guidance
* MPC has looked through some aspects of inflation
* Mindful of overall liquidity position in market
* Too early in new financial year to give time-based guidance
* Current COVID surge may not impact growth as much this time
* Don't think COVID second wave has undermined growth
* Guidance very appropriate
* Businesses better prepared to deal with new wave of COVID
* Don't see need for loan moratorium at this point of time
* All options on the table on forex
* Will try to continue with gilt buy plan beyond Apr-Jun
* New gilt buy plan is not a one-off
* On gilt buy plan size post Apr-Jun: Must have element of surprise
* Will try to continue gilt buy plan; this is just 'GSAP 1.0'
* Primary forex objective is to prevent exchange rate volatility

MICHAEL PATRA
=============
* Gilt buy plan helps market plan engagement with government borrowing
* Assuring market of RBI's support for government borrow with new plan
* Committed balancesheet to monetary policy with gilt buy plan
* Gilt buy plan to run alongside our other instruments
* New gilt buy plan part of RBI liquidity planning for year
* New plan assures gilt buy irrespective of market conditions
* New bond buy plan is explicit commitment on liquidity
* Gilt buy plan replenishes liquidity lost on CRR move
* Global policy spillovers a big issue for Indian economy
* Extremely conscious of core inflation pressures


End

Compiled by Vishal Sangani 
Filed by Avishek Dutta

Cogencis news is now Informist. This follows the acquisition of Cogencis Information Services Ltd by NSE Data & Analytics Ltd, a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt Ltd.

Other News

RBI heft, govt excess – the week that took the bond market by storm

Informist, Friday, Feb 12, 2021 By Bhaskar Dutta NEW DELHI – World over, anyone looking to get a kick out of financial markets would perhaps train their sights on the equity markets that have not only seen valuations soar, but have also recently been the theatre of some hitherto unseen challenges to the established order. In […]

RBI Policy: Top 10 announcements made by Governor Das after MPC meet

Cogencis, Friday, Dec 4, 2020 MUMBAI – Following are edited excerpts of the top 10 announcements made by Governor Shaktikanta Das today after the Reserve Bank of India's Monetary Policy Committee meeting: Keep the policy repo rate unchanged at 4%. Consequently, reverse repo rate remains unchanged at 3.35%, and MSF rate and the Bank Rate at […]

RBI warns tough yrs ahead for states, calls for charting fiscal path

Cogencis, Tuesday, Oct 27, 2020 NEW DELHI – The Reserve Bank of India has warned state governments face a difficult few years, while also calling on them to chart out a glide path for consolidating their debt. "The next few years are going to be challenging for the Indian states. They need to remain empowered […]