RBI Monetary Policy LIVE: Repo rate unchanged at 4%; RBI to soon give retail investors access to G-Sec market

RBI Monetary Policy LIVE: Repo rate unchanged at 4%; RBI to soon give retail investors access to G-Sec market
RBo governor, Shaktikanta Das, Indian economy, financial stability, need for banks to raise resources, NBFCs, fiscal sustainability and external sector viabilityThe MPC voted unanimously to keep rates unchaged.

RBI Monetary Policy LIVE: The Reserve Bank of India’s Monetary Policy Committee today voted unanimously to keep the policy rate unchanged at 4%. In its first post-budget meet, the MPC decided to maintain the status quo. RBI Governor Shaktikanta Das said that the normalisation is pick up pace in India as fears of a second wave of the coronavirus abate. Das further added that the Indian economy is expected to be back this year from the damage done by the pandemic. The move gains significance this time as earlier this week the central government unveiled its massive borrowing plan. Most economists had expected the MPC to continue holding the repurchase rate at 4%. The 10-year bond yield has gone up from 5.93% a day ahead of the Union Budget to 6.08% yesterday. The MPC cut interest rates by 115 basis points last year to maintain liquidity in the financial system but has maintained the status quo for the last three meetings. 

RBI Governor said that the central bank is waiting for the formal proposal from the government on the ARC, AMC that the Union Budget proposed earlier this week. Governor Das said that there have been discussions with the government on a bad bank earlier. 

As GDP grows and the Indian economy grows, the total volume of savings and deposits will expand, RBI Governor said while adding that the Retail Direct plan will not harm the banks.

RBI Governor today said that the digital currency is a work in the progress at the central bank. The government is looking to launch a state owned digital currency.

Retail Direct is a major structural reform, RBI Governor Das said. ‘It has been our endeavour to make G-Sec market accessible to retail investors,’ He added. 

RBI Governor has reiterated that the overall monetary policy stance remains accommodative and that the liquidity for the banking system remains the same.

“The central bank vehemently conveyed its openness to use all monetary tools to keep the liquidity conditions congenial for growth. However, measures are announced to normalize the surplus liquidity conditions, with CRR to be hiked in a gradually phased and non-disruptive manner.  The central bank sounded more optimistic on growth and inflation projections for next fiscal year. Nevertheless, bond markets are not impressed with the same, with yields jumping on concerns of hefty government borrowing. In terms of other measures, RBI emphasized on credit growth, with opening TLTROs to NBFCS for incremental lending, while MSF relaxation has been extended for 6 months,” said  Amar Ambani, Senior President and Head of Research – Institutional Equities, YES SECURITIES.

“The RBI announcement has come on the expected lines, continuing to remain accommodative. However, there is a marginal increase in inflation which at this time of the year would be a cause of concern. What is important to note is while FPI and DI inflows are increased, the manufacturing investments continue to lag and whilst the outlook on growth suggests positive, one may have to carefully watch how credit off-take picks up in the next two quarters. Also, private investments will be critical to drive future economic growth. The two indicators to watch out for in the coming quarters would be household consumption alongside credit off-take from banks. This will determine if there is real demand pick up or if we are still riding the pent up demand,” said Sanjay Kumar, CEO & MD, Elior India.

RBI Governor Shaktikanta Das will address a press conference any minute now. The RBI Governor is expected to address questions related to the bi-monthly MPC decisions taken today and the RBI’s other key decisions. 

The RBI today said that to manage risks in outsourcing, it shall issue guidelines to operators and participants of authorised payment systems. The central bank is looking to ensure that a code of conduct is adhered to while outsourcing payment and settlement-related services.

Systemic liquidity remained in large surplus in December 2020 and January 2021, engendering easy financial conditions. Reserve money rose by 14.5 per cent yo-y (on January 29, 2021), led by currency demand. Money supply (M3), on the other hand, grew by only 12.5 per cent as on January 15, 2021, but with non-food credit growth of scheduled commercial banks accelerating to 6.4 per cent. Corporate bond issuances at ₹5.8 lakh crore during April-December 2020 were higher than ₹4.6 lakh crore in the same period of last year. India’s foreign exchange reserves were at US$ 590.2 billion on January 29, 2021 – an increase of US$ 112.4 billion over end-March 2020.


The RBI has proposed to provide retail investors with online access to the government securities market – both primary and secondary – directly through the Reserve Bank. The facility of buying government securities directly though RBI is to be called Retail Direct. This will be possible by opening Gilt accounts directly with RBI.

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“While the recent moderation in headline inflation rate has lent comfort, RBI will be cautious of demand side inflation picking up as economic growth momentum picks up. Measures on enhanced bank funding window for NBFCs will also benefit the stressed sectors including real estate,” said Shishir Baijal, Chairman & Managing Director, Knight Frank India.

“In line with expectations, the RBI has kept the repo rate unchanged at 4%, while continuing the basic accommodative stance of the policy in response to the objective of revival of growth. It’s a wise step taken to ensure 2021 to be a better year and to be a setting tone for the new economic era. The home loan rates will continue to be at a multi-year row, hence aiding homebuyers. The MSF and bank rates are unchanged at 4.25% and this will help in restructuring many companies which are still in distress due to the lockdown and boosting the sector at large,” said Ram Raheja, Director at S Raheja Realty.

“As part of continuing efforts to increase retail participation in government securities and to improve ease of access, it has been decided to move beyond aggregator model and provide retail investors online access to the government securities market – both primary and secondary – along with the facility to open their gilt securities account (‘Retail Direct’) with the RBI. Details of the facility will be issued separately,” RBI said.

RBI Governor today announced that the central bank will soon allow retail investors to invest in Government securities. The move could help the government tap into a new section entirely for funds. 

Reserve Bank has lowered the retail inflation projection for the current quarter of this fiscal at 5.2 per cent, saying it has returned within the “tolerance band”.

Nifty breached 15,000 for the first time ever as Shaktikanta Das announced that MPC has decided to keep rates unchanged, yet again. The MPC has maintained its accommodative stance.

MPC noted that consumer confidence in the economy is reviving and business expectations of manufacturing, services, and infra remain strong. 

Shaktikanta Das today said that the Reserve Bank of India’s survey points towards improvement in capacity utilisation in manufacturing sector to 63.3% in Q2 of the current fiscal from 47.3% in fiscal first quarter. 

“The basis of the RBI policy remains accommodative, and it is reflected in the status quo with respect to the base rate – the repo rate is unchanged.  But there is a strand of rationalization of excess liquidity, as is evident from the phased hike in the CRR for its restoration to 4 %, the pre-pandemic level,” said Joseph Thomas, Head of Research – Emkay Wealth Management.

“On the expected line, MPC kept the repo rate unchanged and maintained an accommodative stance. Though the Governor assured of more liquidity measures, an increase in the CRR can be seen as the first step towards the normalization of monetary policy. MPC also cautioned about the rise in inflation that could arise from cost-push pressures and rising petroleum prices,” Deepthi Mathew, Economist at Geojit Financial Services.

The Reserve Bank of India’s MPC has said that the growth impulses are now becoming more broad-based with the roll-out of the vaccine in the country auguring well for the end of the pandemic.

With the crude oil prices returning to normal with the developments across the world about vaccines, RBI Governor today said that this has intensified the search for returns, resulting in surges of capital flows into emerging markets like India which as led to an increase in volatility. 

During his MPC announcement, RBI Governor today said that reserve money grew by 14.5% on-year basis on January 29, led by current demand. M3, however, grew only 12.5% on January 15.

Shaktikanta Das today said that the money market and G-Sec yields firmed up in January on perceived market misconceptions about RBI reversing its accommodative market stance.  

In 2021-22 India would undo the damage that covid-19 has done to the economy, RBI Governor Shaktikanta Das said.

RBI currently operates 22 ombudsman offices across the country. To make the mechanism simpler and more responsive, the RBI will introduce centralised processing of grievances. The scheme will be rolled out in June this year. 

RBI said that with the growing participation in digital payments ecosystem a 24X7 helping will be set up to grow confidence in the system of digital payments. 

FPI invested in defaulted corporate bonds will be exempted from the short-term limit and medium-term residual maturity requirement under the medium-term framework.

RBI today announced that retail investors will now be provided with online access to government securities market, both primary and secondary. “This will broader investor base and provide retail investors with enhanced access to participate in Government securities market,” Shaktikanta Das.

To develop IFSCs, RBI today proposed to permit residents to make remittances to IFSC for investment in securities issued by non-resident securities in IFSC.

RBI will come out with a consultative document harmonizing regulatory frameworks applicable to various lenders in the micro finance space. 

Scheduled Commerical Banks will be allowed to deduct the credit disbursed to new MSME borrowed from their NDTL for calculation of CRR. New MSME borrowers will be those who have not accessed funds from banks till January 2021.

RBI decided to extend the dispensation of enhanced HTM of 22% up to March 31, 2023. To include securities acquired between April 1, 2021 and March 31, 2022. “The HTM limits will be restored in phased manner starting June 31, 2023,” RBI Governor said. 

MSF has been extended by the Reserve Bank of India by another 6 months, up to Septemeber 30, 2021. The move will make it easy for lender to access funds.

RBI today announced that CRR will be restored to 3.5% effective from March 27, and 4% effective from May 22, 2021, in two phases.

RBI has proposed to provide funds from banks under the TLTRO on tap scheme to NBFC to specified sectors. 

RBI Governor Das said that the central bank will ensure the government’s borrowing plans are met without hindering with the market.

RBI’s MPC said that CRR normalisation opens up space for a variety of market operations to inject market liquidity. 

RBI Governor Shaktikanta Das said that the central bank remains committed to ensuring there is ample liquidity in the financial system. He added that the liquidity stance is accommodative.


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