RBI Monetary Policy: Key highlights of the RBI Governor Shaktikanta Das’ speech

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The Monetary Policy Committee (MPC) on October 8, 2021, kept the key lending rate, the repo rate, unchanged at 4 per cent and retained the monetary stance as ‘accommodative’. The marginal standing facility (MSF) rate and the bank rate remain unchanged at 4.25 per cent. The reverse repo rate also remained unchanged at 3.35 per cent. This is the eighth time in a row that the MPC has maintained the status quo in rates.

Key highlights of the RBI Governor Shaktikanta Das’ speech

Growth

The real GDP growth forecast for the financial year 2021-22 has been retained at 9.5 per cent. This includes 7.9 per cent in the second quarter of FY 2021-22, 6.8 per cent in the third quarter and 6.1 per cent in the fourth quarter. The Real GDP growth for the first quarter of FY 2022-23 is estimated at 17.2 per cent.

Inflation

The central bank has reduced its FY22 CPI inflation target to 5.3 per cent from 5.7 per cent earlier. In this, the July-September CPI inflation was also 5.1 per cent as compared to 5.9 earlier. The October-December CPI inflation is expected to remain at 4.5 per cent as against 5.3 per cent earlier.

The governor Shaktikanta Das also said that India was in a better position in October than in April, when the last MPC meeting was held. Growth impulses are strengthening, inflation trajectory is more favourable than expected.

The recovery of the Indian economy is gaining momentum; It is in better condition than the last MPC meeting. Growth impulses are strengthening, inflation more favourable than expected; Shaktikanta Das added that our economy is expected to move towards normal times due to the resilience of the economic fundamentals.

On Tap Special Long-Term Repo Operations (SLTRO) for Small Finance Banks (SFBs)

In May 2021, a special three-year long-term repo operation (SLTRO) of Rs 10,000 crore was introduced for small finance banks (SFBs) at the repo rate. This facility is currently available till October 31, 2021. Recognizing the need to continue supporting small business units, micro and small scale industries and other unorganized sector entities, MPC has decided to extend this facility till December 31, 2021, and make it available on tap.

Enhancing Transaction Limit in IMPS to Rs 5 lakh

Immediate Payment Service (IMPS) facilitates 24×7 instant domestic money transfers through various channels. Considering the importance of the IMPS system and to enhance the convenience of the consumers, it is proposed to increase the per transaction limit from Rs.2 lakh to Rs.5 lakh.

The Variable Reverse Repo (VRR) auction will be increased from Rs 4 trillion to Rs 6 trillion every two weeks. RBI may conduct 28-day VRR auctions in addition to 14-day VRR auctions. The quantum of liquidity absorbed through fixed-rate auctions is expected to be around Rs 2-3 trillion in the first week of December.