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RBI has announced Seventh Bi-Monthly Monetary Policy Statement 2019-20: Point-to-Point Details

EducationBro March 30, 2020
RBI has announced Seventh Bi-Monthly Monetary Policy Statement 2019-20: Point-to-Point Details
RBI has announced Seventh Bi-Monthly Monetary Policy Statement 2019-20: Point-to-Point Details

RBI has announced Seventh Bi-Monthly Monetary Policy Statement 2019-20: Point-to-Point Details

Seventh Bi-monthly Monetary Policy Statement, 2019-20 Resolution of the  Monetary Policy Committee (MPC) Reserve  Bank of India.

The Reserve Bank of India, RBI Governor Shaktikanta Das has announced the Seventh Bi-monthly Monetary Policy Statement for the year 2019-20: In view of the COVID-19 pandemic, the Monetary Policy Committee (MPC) decided to advance its meeting scheduled for 31st March, 1st and 3rd April 2020. It met on 24th, 26th and 27th March and undertook a careful evaluation of the current and evolving macroeconomic and financial conditions, and the outlook.

On the basis of an assessment of the current and evolving macroeconomic situation, the Monetary  Policy Committee (MPC) at its meeting today (March  27, 2020) decided to: 

Reduce the policy repo rate under the liquidity adjustment facility (LAF) by 75 basis points to 4.40 per cent from 5.15 per cent with immediate effect. 

Accordingly, the marginal standing facility (MSF) rate  and the Bank Rate stand reduced to 4.65 per cent from 5.40 per cent.

Further, consequent upon the widening of the LAF corridor as detailed in the accompanying Statement on Developmental and Regulatory Polices, the reverse  repo rate under the LAF stands reduced by 90 basis points to 4.0 per cent.

The Cash Reserve Ratio (CRR) of scheduled banks unchanged at 4.0% of (NDTL).

The MPC also decided to continue with the accommodative stance as long as it is necessary to revive growth and mitigate the impact of coronavirus (COVID-19) on the economy, while ensuring that inflation remains within the target.

Moratorium on Term Loans | No EMI For Next Three Months

All commercial banks (including regional rural banks, small finance banks and local area banks), co-operative banks, all-India Financial Institutions, and NBFCs (including housing finance companies and micro-finance institutions) (“lending institutions”) are being permitted to allow a moratorium of three months on payment of instalments in respect of all term loans outstanding as on March 1, 2020.  

According to the RBI Seventh Bi-Monthly Monetary Policy Statement 2019-20, Current RBI Policy Rates Given Below:


Policy Repo Rate
4.40%
Reverse Repo Rate
4.00%
Marginal Standing Facility (MSF) Rate
4.65%
Bank Rate
4.65%
Cash Reserve Ratio (CRR)
4%
Statutory Liquidity Ratio (SLR)
18.25%

RBI Monetary Policy Tools | Monetary Policy Instruments

These decisions are in consonance with the objective of achieving the medium-term target for consumer price index (CPI) inflation of 4 per cent within a band of +/- 2 per cent, while supporting growth.

On the domestic economy, The second advance estimates of the National Statistics Office released in February 2020 implied real GDP growth of 4.7 per cent for Q4:2019-20 within the annual estimate of 5 per cent for the year as a whole. This is now at risk from the pandemic’s impact on the economy. High frequency indicators suggest that private final consumption expenditure has been hit hardest, even as gross fixed capital formation has been in contraction since Q2:2019-20. On the supply side, the outlook for agriculture and allied activities appears to be the only silver lining, with foodgrains output at 292 million tonnes being 2.4 per cent higher than a year ago. A pick-up in manufacturing and electricity generation pulled industrial production into positive territory in January 2020 after intermittent contraction and/or lacklustre activity over the past five months; however, more data will need to be watched to assess whether the recent uptick will endure in the face of COVID-19.

Retail inflation, measured by the consumer price index, peaked in January 2020 and fell by a full percentage point in February 2020 to 6.6 per cent, as the ebbing of onion prices brought down food inflation from double digits in the preceding two months. Price pressures, however, remain firm across protein-rich items, edible oils and pulses; but the shock to demand from COVID-19 may weaken them going forward. While fuel inflation increased sharply in February on the back of the delayed domestic adjustment to international LPG prices, the plunge in international crude prices in March may bring a measure of relief to the extent it is allowed to pass-through.

CPI inflation excluding food and fuel eased in February under the weight of softer prices of transport and communication, and personal care. Households’ inflation expectations a year ahead softened by 20 bps in the March 2020 round of the Reserve Bank’s survey.   

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