RBI Governor Shaktikanta Das Announces the Monetary Policy 2021

Reserve Bank of India’s Governor, Mr Shaktikanta Das, addressed the press today to announce the key rates applicable to FY21-22. The Monetary Policy Committee (MPC) has completed the three-day meeting on 4 June 2021, and the subsequent outcomes of the meeting have been publicised.

The governor stated that the repo rates would be retained at a record low of 4%. Similarly, the Marginal Standing Facility Rate (MSFR) and bank rate will remain at 4.25%, and the reverse repo rate will remain unchanged at 3.35%. 

Further, he mentioned that the monetary panel is committed to supporting the country’s growth through an accommodative stance as long as it may be needed. 

This is especially crucial as the second wave of COVID-19 in the country has induced huge economic disruption. The drop in urban demand and spread of COVID-19 in rural areas are expected to impact the GDP growth negatively. 

The other highlights of the Monetary Policy 2021 are listed below:

• Real GDP contraction is at 7.3% for FY21 and is seen at 9.5% in FY 21-22.
  • Q1 of FY 21-22 – 18.5%
  • Q2 of FY 21-22 – 7.9%
  • Q3 of FY 21-22 – 7.2%
  • Q4 of FY 21-22 – 6.6%
• CPI inflation is expected at 5.1% in FY 21-22.
  • Q1 of FY 21-22 – 5.2%
  • Q2 of FY 21-22 – 5.4%
  • Q3 of FY 21-22 – 4.7%
  • Q4 of FY 21-22 – 5.3%
• RBI is focussing on equitable distribution of liquidity.
• Adequate liquidity worth Rs.36,545 crore has been infused into the stressed sectors.
• Money aggregates have grown by 9.9% year-on-year (YOY), and bank credit has grown by 6% (YOY) in May 2021.
• Under government securities 1.0 (G-sec), a purchase worth Rs.40,000 crore will be conducted.
• G-SAP 2.0 worth Rs.1.2 lakh crore is scheduled in the second quarter of FY22 to support the market.
• Forex reserves have hiked to $598 billion.
• On-Tap Liquidity Window worth Rs.15,000 crore, at a repo rate, will be opened for contact intensive sectors, such as hospitality, tourism, bus operators, salons, aviation, and ancillary services.
• A special liquidity facility of Rs.16,000 crore will be extended to SIDBI to support MSMEs.
• Under the Resolution Framework 2.0, the coverage for borrowers will be increased up to Rs.50 crore from Rs.25 crore.

For any clarifications/feedback on the topic, please contact the writer at apoorva.n@cleartax.in