The six-member Monetary Policy Committee (MPC), headed by the RBI Governor, announced its decisions to revive the coronavirus-hit economy today. This was the 24th meeting of the MPC. "The world is bracing for a second wave of coronavirus, however, the challenges of today will only strengthen our resilience," RBI Governor Shaktikanta Das said, after announcing key policy measures, underlining the stress on financial institutions and economies by the pandemic.
Here are some key highlights:
- Bank rate, Reverse Repo Rate and Policy Repo Rate remain unchanged.
- Repo rate to remain at 4%
- Reverse repo rate also remains unchanged at 3.3%
- RBI to maintain accommodative stance, says Governor Shaktikanta Das after meeting of Monetary Policy Committee
- Accommodative stance of the monetary policy will continue as long as necessary to revive growth and mitigate the impact of the coronavirus to ensure inflation remains within the target, reiterates RBI Governor
- Global economic activity has remained fragile in first half of 2020
- CPI inflation eased in April, rose June onwards
- Imports fell sharply in June
- India's economic growth to contract in first half of fiscal beginning April 2020
- Inflation likely to ease in second half of the year
- Economic activity started in India to recover after May
Outlook:
- Supply chain disruptions persist. However food price inflation may see a better outlook with better crops, acreage
- Rise in Petrol prices will continue to pressure prices
- Recovery in Rural economy is expected to remain robust
- Consumer confidence more gloomy in July
- Real GDP expected to remain in contractionary zone
- Early containment of pandemic may impart an upside to the outlook
How RBI measures have helped the country
- Liquidity measures have been sterilised which have supported financial markets, borrowing costs including mutual funds
- RBI open market purchases will reduce funding costs
- Fresh Rupee loans have come down by over 160 basis points
Objectives of MPC behind additional measures
- Enhance liquidity measures
- Further ease financial stress, strengthening credit discipline
- Deepen digital payments
- Enhance security measures
Additional special liquidity measures:
- 5,000 crores to housing finance companies, NHB and 5,000 crores to NABARD
- Covid-19 has heightened stress for companies, financial institutions, which impacts their viability. Under June 7, 2019 framework, a window to provide restructuring of loans of corporate, individual borrowers to ease Covid-19 impact
- Restructuring framework instroduced for MSMEs: Stressed MSME borrowers to be eligible for restructuring of debt if their accounts were classified standard
- Advanced against gold jewellery: Permissible LTV ration has been increased to 90% from 75%
- Banks holding debt instruments and debt instruments through mutual funds to be harmonised
- With a view to aligning guidelines: Higher weightage to be given to districts, regions with priority sector credit requirements. Priority sector lending status extended to start-ups
- RBI to set up an innovation hub
- Mechanism of 'positive pay' for cheques of Rs 50,000 and above