CIN : L74899DL1996PLC077120
  title  Market News Updates
6th RBI Monetary Policy Outcome and Developmental & Regulatory policyPosted on: 07/02/2020 3:23 pm
6th RBI Monetary Policy Outcome and Developmental & Regulatory policy In its 6th Bi Monthly MPC meet, RBI maintained status quo on policy rates (all members voting in favour of the decision) while continuing to maintain an accommodative/dovish stance. With regard to inflation, RBI asserts that the inflation scenario remains highly uncertain and that the MPC would remain vigil about potential generalisation of inflationary pressures in the economy emanating from hardening of other food item prices, revision in telecom charges etc. RBI has revised its inflation projection upwards to 6.5% for Q4. On the growth front, RBI states that economic activity continues to remain subdued but expects the measures announced in the Union Budget and previously to provide impetus to the economy. RBI projects GDP growth at 6% for FY 2020-21 in line with the growth projected in the economic survey (6 to 6.5%). Development & Regulatory Policies Though RBI has maintained status quo on policy rates, it has taken several unprecedented measures in order to improve monetary transmission in the economy and push the flow of credit to different sectors. Through another statement on Development & Regulatory policies, RBI has announced the revised liquidity management framework of which key points are: Liquidity Management Framework: 1) Liquidity management corridor retained at 50 bps. WACR continues to be the operating target. Meanwhile, no requirement for mentioning one sided target for liquidity provision at 1% of NDTL henceforth. 2) Daily fixed rate repo and four 14 days variable rate term repos are withdraw. Instead the main liquidity management tool will be a 14 day term repo/reverse repo operation at variable rate. If needed longer term variable repo/reverse repo of more than 14 days will also be conducted. 3) Long Term Repo Operation: LTRO is another key announcement by RBI under which it will conduct term repos of 1-year and 3-year tenors for upto Rs. 1 lakh crore at the repo rate. The same is expected to provide an alternative cheap source of finance to the banks and it is intended towards improving the rates transmission in the economy & improve credit flow. LTRO facility is for banks and guidelines shall be issues separately. 4) Exemption to banks on NDTL maintenance on incremental credit to sectors with important multiplier effects.