MPC Meet Highlights: Shaktikanta Das kept 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, August 4, as it evaluates the economy which is in a nascent stage of recovery from the deadly second wave of the COVID-19 pandemic.
RBI's monetary policy committee voted unanimously 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 the RBI borrows money from banks, was also unchanged at 3.35 per cent.
The central bank retained the gross domestic product (GDP) growth projection for the current fiscal at 9.5 per cent, however, given inflationary concerns, it increased the CPI inflation estimate to 5.7 per cent from 5.1 per cent.
The economy witnessed a record contraction of 7.3 per cent for the previous fiscal 2020-21, recording its worst-ever performance in over four decades. Recently, the International Monetary Fund (IMF) trimmed India's growth projection from 12.5 per cent to 9.5 per cent for the current fiscal. Among all countries, India witnessed the largest drop in growth projections made by IMF, even as the global economic growth rate remains the same at six per cent.
This is the third bi-monthly monetary policy review for the financial year 2021-22, at a time when the country stares at a looming threat of a third wave of the pandemic amid a slow pace of vaccination coverage.
Here are the highlights from today's RBI Governor Shaktikanta Das-led Monetary Policy Committee meeting:
Next RBI Monetary Policy Meeting To Be Held In October 2021
The next meeting of the RBI Monetary Policy Committee MPC is scheduled to be conducted during October 6 to 8, 2021.
MPC Meet Live Updates: Policy has been largely growth-oriented,, supporting liquidity, say experts"As expected the MPC voted to keep the key rates and the policy stance unchanged. The decision to extend the on-tap TLTRO scheme once again till December will maintain ample liquidity and support growth. RBI's view of current high inflation being largely transitory in nature and its focus on growth is a big positive. The economy is showing signs of revival, it needs policy support.
RBI's estimate of inflation softening post-Q2 indicates that the current policy may continue for few quarters, with a beginning of normalization by end of FY22. The policy has been largely growth-oriented, supporting easy liquidity. It will help attain the high growth as estimated by the central bank - 9.5% & 17.2% for FY22 and FY23 respectively,'' said Mr. Nish Bhatt, Founder & CEO, Millwood Kane International - an Investment consulting firm.
RBI Monetary Policy LIVE: RBI In "Whatever It Takes" Mode To Revive GrowthRBI Governor Shaktikanta Das said that the central bank remains in
"whatever it takes" mode to revive growth as it kept the GDP growth forecast unchanged at 9.5 per cent for the current fiscal.
RBI Monetary Policy LIVE: We expect RBI to be more accountable and action oriented, say experts"The MPC expectedly kept the key rates unchanged unanimously and reiterated its accommodative stance both on rates and liquidity. However one dissent on continuation of accommodative stance for foreseeable future shows the emerging split getting generated within the MPC.
Their statement on keeping a balance in on-the-run and off-the-run securities while conducting GSAPs is welcome as with markets were showing their discomfort with RBI's choice of papers for GSAP and devolution of papers at cut-off yields uncomfortable to the RBI. However, the RBI still hinted at their preference for lower sovereign risk premia ahead.
We reckon that even with yields inching up orderly and gradually, the RBI will continue to strive to fix the artificially skewed yield curve and maintain its preference for curve flattening. We expect the RBI to get more accountable and action oriented as we move into 2HFY22. We maintain RBI may have to stretch GSAP/OMOs beyond Rs 4.5-5tn+ to manage impending demand-supply mismatch,'' said Ms. Madhavi Arora, Lead Economist, Emkay Global Financial Services.
MPC Meet Live Updates: Should be able to tide over 3rd wave with higher vaccination rate
RBI Governor Shaktikanta Das said that with adequate COVID-19 protocols in place and a ramp up in the rate of vaccination, the country should be able to tide over a third wave, if it occurs.
MPC Meet Live Updates: Expect MPC to prioritize supporting growth in coming months, say experts ''While the status quo on rates with a 6-0 voting and continued "accommodative" stance were on expected lines, the split voting as regards the policy stance was a modest surprise. Still, the overall tone of policy continued to focus clearly on supporting growth recovery.
Given higher global commodity prices, sticky food inflation and rise in domestic fuel prices, inflation may stay higher than for the RBI's comfort. However, with the tentative and uneven nature of recovery, one expects the MPC to continue prioritizing supporting growth in the coming months,'' said Siddhartha Sanyal, Chief Economist and Head - Research, Bandhan Bank.
RBI Monetary Policy LIVE: RBI Governor Shaktikanta Das To Address Post-Policy Press ConferenceRBI 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 regulating authority.
RBI Monetary Policy LIVE: Rupee fell against dollar after RBI policy statement, say experts''The RBI kept the rates unchanged in its monetary policy statement and kept the stance accommodative. They kept the growth unchanged at 9.5 per cent. The inflation was expected to be at 5.7 per cent up from 5.1 per cent for FY'22. One member has voted against the accomodative. Bond yields rose on less dovish policy from RBI. The stock markets fell as the Amazon-RIL Future Group verdict went in favor of Amazon in SC.
The rupee fell after making a high of 74.09 as RBI started absorbing inflows and importers bought dollars to hedge,'' said Mr. Anil Kumar Bhansali, Head of Treasury, Finrex Treasury Advisors.
RBI Monetary Policy LIVE: No clarity on the timeframe for the policy corridor normalization, say experts''Importantly, MPC has revised the inflation forecasts for FY22 to 5.7 per cent from the earlier 5.1 per cent given the inflationary overhang seen in the first quarter of the year. Nevertheless, it continues to believe that the inflationary pressures are transitory in the backdrop of supply-side constraints and a spurt in commodity prices.
It is amply evident that RBI is comfortable with the headline inflation hovering around six per cent i.e. the upper band in MPC's inflation targetting framework in the current environment which it continues to label as 'extraordinary'.
While RBI would continue to maintain adequate systemic liquidity and implement the previously announced programmes like the GSAP, it has also announced its intent to manage short-term liquidity more actively through a significantly higher quantum of Variable Rate Reverse Repo Auctions (VRRR). However, there are no clear indications regarding the timeframe for the normalization of the policy corridor.
The policy support for the stressed sectors has been reaffirmed with the extension of timelines for TLTRO till Dec-21 and relaxation in some key financial parameters for the OTR under Covid. This will help in quicker resolution of some of the pending stressed exposures in the banking system,'' said Suman Chowdhury, Chief Analytical Officer, Acuité Ratings & Research.
RBI Monetary Policy LIVE: Time is ripe for Centre, RBI to take demand stimulant measures, say experts"Despite the inflationary pressures, RBI maintaining status quo on key policy interest rates and continuing with growth supportive policy stance was need of the hour. Extended period of historic low interest rates would ensure home loan rates remain at current benign levels and aid the revival of real estate sector. We have also seen many real estate developers refinancing their borrowings at lower interest cost and benefit from the lower interest rate regime, which is crucial at this juncture when business operations are facing the pandemic pressure.
In addition to this monetary policy intervention, the time is ripe for the RBI and government to undertake more valiant demand stimulant measures to help the economy to cross FY20 GDP levels and ensure a broad-based revival. The lower interest rate environment and demand stimulant measures from government coupled with the on-going vaccinations is likely to encourage businesses and consumers to avail credit to expand their business or fulfill consumption requirements, thereby stimulating the economy,'' said Mr. Shishir Baijal, Chairman & Managing Director, Knight Frank India.
MPC Meet Live Updates: RBI maintained ample liquidity in system since onset of COVID-19Through its market operations, the RBI maintained ample surplus liquidity since the onset of the
pandemic to ensure easing of financial conditions in support of domestic demand, said RBI Governor Shaktikanta Das.
With the capital inflows and the RBI's purchase of government securities in the secondary market, the total absorption through reverse repos surged from a daily average of Rs 5.7 lakh crore in June to Rs 6.8 lakh crore in July 2021 and further to Rs 8.5 lakh crore in August 2021 so far (up to August 4).
MPC Meet Live Updates: Yields at longer end will inch up towards 6.5% gradually, say experts"RBI policy is hawkish at the margin. RBI has acknowledged the strong growth and negative surprise on the inflation front. One of the MPC members has voted for a change in accommodative stance. While there is no real change in the policy, bond market participants will take the nuanced change in language seriously. There is a distinct possibility that yields at the longer end, 10 years, will inch up towards 6.50 per cent gradually. Investors should invest in bond funds with lesser than 3 years maturity to minimise interest rate risk,'' said Mr. Sandeep Bagla CEO TRUST Mutual Fund.
RBI Monetary Policy LIVE: Export credit in Foreign Currency and Restructuring of Derivative ContractsAccording to the central bank, the transition away from London Interbank Offered Rate (LIBOR) is a significant event that poses certain challenges for banks and the financial system. RBI decided to revise the guidelines related to the export credit in foreign currency and the restructuring of derivative contracts.
Banks will be permitted to extend the export credit in foreign currency using any other widely accepted Alternative Reference Rate in the currency concerned.
RBI Monetary Policy LIVE: Extension in period of relaxation for marginal standing facilityBanks were allowed to avail of funds under the marginal standing facility (MSF) by dipping into the Statutory Liquidity Ratio (SLR) up to an additional one per cent of net demand and time liabilities (NDTL).
This facility was extended for a period of six months till September 30, 2021, providing comfort to banks on their liquidity requirements and also to enable them to meet their Liquidity Coverage Ratio (LCR) requirements.
The dispensation provides increased access to funds to the extent of Rs 1.62 lakh crore and qualifies as high-quality liquid assets (HQLA) for the LCR. RBI has extended the MSF relaxation for a further period of three months, up to December 31, 2021.
RBI Monetary Policy LIVE: Inflation targets for all quarters in current fiscal RBI Governor said that inflation may remain close to the upper tolerance band up to the second quarter of current fiscal, however the pressures should decline in the third quarter on account of kharif harvest arrivals and as the supply side measures take effect. CPI inflation for first quarter is projected at 5.1 per cent, for second quarter at 5.9 per cent, for third quarter at 5.3 per cent, for fourth quarter at 5.8 per cent, with risks broadly balanced.
RBI Monetary Policy LIVE: Recent G-SAP auctions focused on security across maturity spectrumRBI Governor said recent G-SAP auctions that have focussed on securities across the maturity spectrum are intended to ensure that all segments of the yield curve remain liquid. It is expected that the secondary market volumes would pick up and market participants take positions that lead to two-way movements in yields, he added.
MPC Meet Live Updates: Government's decision to dip into cash balancesRBI Governor Shaktikanta Das said that the government's decision to dip into cash balances for GST borrowing should assuage market fears of extra borrowing.
RBI Monetary Policy LIVE Updates: Higher appetite for variable reverse repo rate
RBI Governor Shaktikanta Das said that there has been a higher appetite for variable reverse repo rate (VRRR) in recent auctions. RBI will conduct more VRRR of higher quantum in the August-September period. The VRRR quantum will be hiked to Rs 4 lakh crore
RBI Monetary Policy LIVE Updates: RBI to conduct two G-SAP auctionsThe central bank will conduct two G-SAP auctions of Rs 25,000 crore each, announced RBI Governor Shaktikanta Das.
RBI Monetary Policy LIVE: RBI extends on-tap TLTRO scheme by 3 months till December, 2021
RBI Governor announced the extension of the on-tap long-term repo operation (TLTRO) scheme by three months till December, 2021
RBI Monetary Policy LIVE Updates: Inflation may remain close to upper tolerance band until second quarterRBI Governor Shaktikanta Das announced that inflation may remain close to the RBI's upper tolerance band until the seocnd quarter of the current fiscal and that the supply-side drivers could be transitory.
RBI Monetary Policy LIVE Updates: RBI increases inflation projection to 5.7 per cent for current fiscalRBI Governor Shaktikanta Das has increased the CPI inflation estimate for the current fiscal to 5.7 per cent from 5.1 per cent.
RBI Monetary Policy LIVE Updates: More needs to be done to restore supply-demand balanceRBI Guv Shaktikanta Das said that CPI inflation surprised on the upside in May 2021. The outlook for aggregate demand is improving but underlying conditions are still weak. More needs to be done to restore supply-demand balance in number of sectors.
RBI Monetary Policy LIVE Updates: RBI retains GDP growth projection at 9.5 per cent for current fiscal
RBI Governor Shaktikanta Das said that the gross domestic product (GDP) growth projected for the current fiscal 2021-22 is retained at 9.5 per cent. The RBI Governor added that the growth is projected at 21.4 per cent in the first quarter, 7.3 per cent in second quarter, 6.3 per cent in third quarter, and 6.1 per cent in fourth quarter.
RBI Monetary Policy LIVE Updates: Indicators suggest consumption, demand gaining traction
RBI Governor Shaktikanta Das said that that high frequency indicators suggest that consumption, invstment, and external demand are gaining traction. He added that the increasing vaccination will likely aid broad-based recovery
RBI Monetary Policy LIVE: RBI maintains an accommodative stance
All members of the RBI monetary policy committee voted unanimously to keep the interest rates unchanged and maintain its accommodative stance for as long as as required to revive the economy amid the COVID-19 pandemic
RBI Monetary Policy LIVE: Monetary Policy Committee Keeps Interest Rates Unchanged
The Reserve Bank of India'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. The monetary policy committee voted unanimously to maintain an accommodative stance and keep the key rates unchanged
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, August 6. A post policy press conference will be telecast at 12:00 noon today
RBI Monetary Policy LIVE Updates: Banking Stocks In Focus TodayThe shares of private banks and PSU are likely to be focus today amid market hours, as the Reserve Bank of India will announce key decisions on interest rates, liquidity measures. Ahead of the policy announcement, the stock markets opened at record highs with the Nifty 50 index advancing above its psychological level of 16,300-mark
RBI Monetary Policy LIVE: Here's what analysts expect''The MPC will likely maintain that growth is still sub-par -- needs consistent firm traction and continued policy support is crucial for durable growth revival. We do not see any split in voting pattern on accommodative stance.
Yield curve and liquidity management will remain policy focus. The RBI will again assuage markets and continue to ensure that no premature tightening of financial conditions would happen and yields uptick is managed smoothly. Markets would watch any hint on GSAP 3.0 and choice of securities (G-sec/SDL) mix.
The policymakers would tread cautiously on this front to see orderly evolution of yield curve, having seen extreme market reactions in the past. That said, we reckon surplus liquidity has led to asymmetric gains in credit markets and excessive risk taking in other asset classes
We reckon the RBI will continue to strive fixing artificially skewed yield curve and maintain its preference for curve flattening.
We expect the RBI to get more accountable and action oriented as we move into 2HFY22. We maintain RBI may have to stretch GSAP/OMOs beyond Rs4.5tn+ to manage impending SLR demand-supply mismatch.'' said Madhavi Arora, Lead Economist, Emkay Global Financial Services.
RBI Monetary Policy LIVE Updates: RBI may take steps towards normalisation of liquidity: Experts"The MPC meets at the cusp of a visibly sticky inflation, nudging growth phase and a fluid pandemic situation world over. The central banker is mostly likely to maintain a status quo on rates being mindful of growth and wait for more data points on inflation front. There could be some steps towards normalisation of liquidity via increased tenor and/or quantum of VRRR (variable rate reverse repo) - something which bond markets seem to be anticipating,'' said Lakshmi Iyer, CIO (Debt) & Head Products, Kotak Mutual Fund.
RBI Monetary Policy LIVE: RBI trimmed GDP growth projection to 9.5 per cent in last policy meeting
In the last bi-monthly monetary policy committee meet held in June 2021, 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.
RBI Monetary Policy LIVE Updates: Here's what analysts expect"While this MPC meeting is widely expected to be a non-event status quo, market will be keenly watching for forward guidance on future policy normalisation. In particular any RBI action on fine-tuning banking system liquidity as well as any further steps towards ongoing "orderly evolution of yield curve" will be the key determinants of interest rates going forward,'' said Churchil Bhatt, EVP Debt Investments, Kotak Mahindra Life Insurance Company Limited.
RBI Monetary Policy Updates: Central bank may keep key lending rates unchangedIn a recent poll conducted by news agency Reuters, all 61 economists who took part in the survey see no change in the repo rate. However, they expect the RBI to make two 25 basis point increases in the next fiscal, taking the repo rate to 4.50 per cent by end of March 2023.
RBI Monetary Policy LIVE: Where to watch RBI monetary policy statement
RBI Monetary Policy LIVE Updates: RBI Governor To Deliver Monetray Plicy 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 (August 6, 2021). The RBI 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 third bi-monthly Monetary Policy Committee (MPC) statement of the financial year 2021-22 today