Key Highlights:
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The MPC voted unanimously to keep the policy repo rate unchanged at 4%.
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Reverse repo rate remains unchanged at 35%.
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The stance remained accommodative, five members voted in favour, while one voted for a change.
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CRR is maintained at 4%
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Projection for real GDP growth is retained at 9.5% in FY22 consisting of 7.9% in Q2, 6.8% in Q3, and 6.1% in Q4. Real GDP growth for Q1 in FY23 is projected at 17.2%.
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CPI inflation is now projected at 5.3% during FY22: 5.1% in Q2, 4.5% in Q3, and 5.8% in Q4 of FY22, with risks broadly balanced. CPI inflation for Q1FY23 is projected at 5.2%.
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Special Long Term Repo operation for banks extended till 31st
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The central bank will conduct variable rate reverse repo auctions on a fortnightly basis of up to Rs 4 lakh crore today, Rs 4.5 lakh crore on Oct. 24, Rs 5 lakh crore on Nov. 3, Rs 5.5 lakh crore on Nov. 18, and Rs 6 lakh crore on Dec. 3.
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RBI fells there is no further need for G-SAP, Given the liquidity overhang and the absence of fresh government borrowing for GST compensation means that these bond purchases are not necessary.
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Governer says the quantum of capital flows, pace of government expenditure and credit offtake—the RBI may also consider complementing the 14-day VRRR auctions with 28-day VRRR auctions in a similar calibrated fashion.
- RBI will continue to undertake Operation Twist.
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RBI increases per transaction IMPS limit to 5 lac from 2 lac
RBI Governor said India in a much better place today than at the time of the last MPC meeting. Growth impulses are strengthening, inflation trajectory more favourable than expected, Capacity utilisation in the manufacturing sector recovered in Q2, further improvements expected in coming quarters. Food inflation is expected to remain muted in the coming month on the back of record production of foodgrains. Pent-up demand, festival season should boost urban demand. Recovery in demand gathered pace in Aug-Sep. Pick-up in import of capital goods point to some recovery in activity,
Outlook:
India’s Monetary Policy Committee kept its key policy rate unchanged while there was some build up for hike in reverse repo but RBI has kept it unchanged, policy as expected remained cautious and in a wait-and-watch mode, MPC has continued its commitment to an accommodative policy While there has been no changes in any of the benchmark rates whatsoever, the central bank has indicated its willingness to make a ‘gradual’ adjustment to the excess liquidity in the monetary system which currently stands at over Rs 9 Lakh Cr.
RBI has reduced its forecasts for the headline inflation to 5.3% from 5.7% in FY22 based on the current moderation in the liquidity trajectory. While food inflation is expected to remain low, we believe there is a case to monitor inflation very closely over the next few months given the continuing commodity price pressures and disruption in china is impacting supplies for Indian companies, even the bond market is keeping a close eye on inflation as bond yield has moved from 6% to 6.3% and Rupee has also started to move toward 75 per dollar as there are worries of rising crude oil may impact India’s current Account.
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