• By Elite Wealth
  • / December 8, 2021
  • / Article

Key Highlights:

  • le=”text-align: justify;”> The MPC voted unanimously to keep the policy repo rate unchanged at 4% for the ninth time.
  • le=”text-align: justify;”>Reverse repo rate remains unchanged at 3.35%.
  • le=”text-align: justify;”>The stance remained accommodative, five members voted in favour, while one voted for a change.
  • le=”text-align: justify;”>CRR is maintained at 4%
  • le=”text-align: justify;”>Projection for real GDP growth is retained at 9.5% in FY22 consisting of 6.6% in Q3 FY22 (earlier 6.8%), and 6% in Q4 FY22 (earlier 6.1% in Q4). Real GDP growth for Q1 and Q2 in FY23 is projected at 17.2% and 7.8% respectively.
  • le=”text-align: justify;”>CPI inflation is projected remain unchanged at 5.3% during FY22: to peak in Q4 with 5.1% in Q3 (earlier 4.5%), and 5.7% in Q4 (Earlier 5.8%) of FY22. CPI inflation for Q1FY23 and Q2FY23 is projected at 5.0% each.
  • le=”text-align: justify;”>Reductions in excise duty and VAT should reduce inflation with reduction in transportation cost.
  • le=”text-align: justify;”>The central bank will conduct variable rate reverse repo auctions on fortnightly of up to Rs 6.5 lakh crore in mid- December and Rs 7.5 lakh crore at the end of the month. 14-day VRRRs will continue to be complemented by longer term 28-day VRRR auctions.
  • le=”text-align: justify;”>Banks can lower NDTL to 2% with effect from January 1, 2022, as against 3% now.
  • le=”text-align: justify;”>UPI transaction limit hiked to Rs 5 lakh from current limit of Rs 2 lakh for retail direct scheme for investment of GIlts and IPO offering applications.
  • le=”text-align: justify;”>Banks won’t need seek prior approval of RBI to infuse capital in overseas subsidiaries and repatriate the profits, if they meet the regulatory requirements on capital.
  • le=”text-align: justify;”>TLTRO (targeted long-term repo operations) will continue till the terminal date.
  • Tle=”text-align: justify;”>o provide banks with one more option to pre-pay outstanding funds availed through TLTRO 1.0 and 2.0 schemes. Banks have already pre-paid Rs 37,348 crore in November, constituting about a third of Rs. 120,900 Crore funds availed from TLTRO scheme
  • le=”text-align: justify;”>RBI issued guidelines for use of alternative reference rate for ECBs, in transition away from LIBOR

le=”text-align: justify;”>RBI Governor said The MPC also decided to continue with the accommodative stance as long as necessary to revive and sustain growth on a durable basis and continue to mitigate the impact of Covid-19 on the economy, while    ensuring that inflation remains within the target going forward


India’s Monetary Policy Committee kept its key policy rate unchanged as expected. MPC has continued its commitment to an accommodative policy while there have been no changes in any of the benchmark rates whatsoever, as a result, the benchmark 10-year bond yield fell to 6.36% after opening at 6.40%. The Indian economy grew 20.1% in the first quarter of the current financial year and 8.4% in the second. Recovery which was interrupted by the second wave of the pandemic is gaining traction but is not yet strong enough to be self-sustaining however by the February Policy growth outlook will be clearer.

le=”text-align: justify;”>RBI raised its forecasts for the headline inflation to 5.1% from 4.5% for Q3FY22 based on damage to perishable food items due to unseasonal heavy rains and telecom price hikes to push inflation up yet again.  Large part of the liquidity infused during pandemic is coming back as banks have already pre-paid Rs 37,348 crore in November, constituting about a third of funds availed from TLTRO scheme. Repaying LTROs is a mild step to reduce liquidity in the system.

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