Key Highlights:

  • RBI Leaves Repo Rate unchanged at 4%
  • Reverse repo rate remains unchanged at 3.35%
  • Maintained an accommodative stance.
  • Inflation likely to ease to projected target by Q4 of FY’21
  • Expect Retail Inflation to remain elevated in September, ease over Q3 & Q4
  • RBI sees GDP for FY21 contracting 9.5% with chances of strong rebound
  • Expects three-speed recovery across different sectors
  • RBI to conduct OMO worth Rs 20,000 crore next week.
  • RBI announces on-tap TLTRO for Rs 1 trillion at 4% till March 2021
  • Ways & Means Advance (WMA) limit for the Centre kept at Rs 1.25 lakh crore
  • To extend dispensation on enhanced limits of SLR securities under HTM category to March 31, 2022.
  • RBI will allow banks to increase exposure to retail and small borrowers up to Rs 7.5 crore.
  • Extended the scheme for co-lending to all NBFCs and HFCs
  • Rationalize the risk weights and link them to LTV ratios for all new housing loans sanctioned up to March 31, 2022
  • The RTGS system for real-time fund transfer to become 24X7 from December. Under the current rules, the transfers can be made between 7 AM and 6 PM on all working days except for the second and fourth Saturday of the month and on Sundays.

The phase of deep contraction is behind us and silver linings are visible, said Governor Shaktikanta Das. Barring a second waive, India stands poised to shrug off the deadly virus and restart its tryst with pre-Covid growth trajectory, Das said, striking an optimistic note.

This is the first meeting of the new MPC which was formed after the appointment of three eminent economists – Jayant Verma, Ashima Goyal and Shashanka Bhide.

RBI to conduct OMOs worth Rs. 20,000 crore next week and Special OMOs for state loans

RBI will maintain comfortable liquidity conditions and will conduct market operations in the form of outright and special open market operations. In response to feedback from market participants, the size of these auctions will be increased to Rs. 20,000 crore. It is expected that the market participants will respond positively to this initiative

For the first time ever, RBI will conduct OMOs of state loans. “In order to impart liquidity to SDLs (state Developments loans) and thereby facilitate efficient pricing, it has been decided to conduct open market operations (OMOs) in SDLs as a special case during the current financial year.

Outlook:

OMOs in SDL would improve secondary market activity and rationalize spreads of SDLs over central government securities of comparable maturities. Measures like rationalization of risk weights to all new housing loans until March 2022 would give a fillip to housing loan growth. LTV means how much the value of the property a bank can lend to a borrower. This move will likely make more credit available to borrowers, particularly for the higher value loans. The RBI has also extended the scheme for co-lending to all NBFCs and HFCs which will ease credit availability for the real estate sector.

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