• By Elite Wealth
  • / February 10, 2022
  • / Article

Key Highlights:

  • The MPC voted unanimously to keep the policy repo rate unchanged at 4% for the tenth time.
  • Reverse repo rate remains unchanged at 3.35%.
  • The stance remained accommodative, five members voted in favor, while one voted for expressed reservations.
  • CRR is maintained at 4%
  • Projection for real GDP growth for FY23 is at 7.8% in FY22 consisting Q1 at 17.2%, Q2 at 7%, Q3 at 4.3% and Q4 at 4.5% for FY23
  • CPI inflation projection remain unchanged at 5.3% during FY22: to peak in Q4 at 5.7%. CPI inflation for FY23 is projected 4.5%. This includes Q1 at 4.9%, Q2 at 5%, Q3 at 4% and Q4 at 4.2% for FY23.
  • Variable rate repo and variable rate reverse repo auctions of 14-day tenor will operate as the main liquidity management tool.
  • VRRRs of longer maturity – increased from 3.37 per cent as at end-August 2021 to 3.87 percent as on February 4, 2022.
  • Main operations will be supported by fine-tuning operations to tide over any unanticipated liquidity changes
  • Reverse Repo & MSF operations will be available during 5.30 pm to 11.59 pm daily as before Covid.
  • The e-RUPI pre-paid digital voucher developed by the NPCI was launched in August 2021. The single use cashless payment voucher has a cap of Rs. 10,000. It is now proposed to increase the cap of e-RUPI vouchers from Rs.10,000 to Rs.1,00,000 per voucher and permit such e-RUPI vouchers to be used more than once.
  • The RBI has hiked the limit for inflows under the Voluntary Retention Scheme to Rs 2.5 lakh crore from Rs 1.5 lakh crore. This will provide additional sources of capital for domestic debt markets, including government securities.
  • Allowed banks in India to undertake transactions in the offshore Foreign Currency Settled-Overnight Indexed Swap (FCS-OIS) market with non-residents and other market makers.
  • Likely to keep the Current account deficit well below 2.0 per cent of GDP during 2021-22.

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 against the anticipation of a potential hike in reverse repo rate. 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 over 5 basis points to 6.75% as dovish view was definitely not expected in the policy. RBI did not announce any direct support for government bonds amid a record borrowing program, it signaled that it would continue to support the orderly evolution of the yield curve. With no change in the policy rates there will be no immediate impact on the EMIs of home loan, auto loan and personal loan.

RBI remained its forecasts for the headline inflation low for the FY23 and expressed a very dovish outlook for inflation for FY23, forecasting it at 4.5%. This comes despite higher oil and commodity prices. We need to see the inflation number to change upward for any further RBI action to be taken on interest rates.

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