Monetary Policy Statement, 2020-21 -Released by RBI
Monetary Policy Statement, 2020-21 -Released by RBI

Monetary Policy Statement, 2020-21 -Released by RBI

  • On the basis of an assessment of the current and evolving macroeconomic situation, the Monetary Policy Committee (MPC) at its meeting today (May 22, 2020) decided to-
  • Reduce the policy repo rate under the liquidity adjustment facility (LAF) by 40 bps to 4.0 per cent from 4.40 per cent with immediate effect;
  • Accordingly, the marginal standing facility (MSF) rate and the Bank Rate stand reduced to 4.25 per cent from 4.65 per cent; and
  • The reverse repo rate under the LAF stands reduced to 3.35 per cent from 3.75 per cent.
  • The MPC also decided to continue with the accommodative stance as long as it is necessary to revive growth and mitigate the impact of COVID-19 on the economy, while ensuring that inflation remains within the target.
  • 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.
  • RBI Governor said it is in growth outlook that the MPC judged the risks to be gravest.
  • GDP growth in FY21 estimated to remain in negative territory, with some pick-up in H2.
  • Top 6 industrialised states accounting for about 60 pc of industrial output largely in red/orange zones
  • High frequency indicators point to collapse in demand beginning in March.
  • MPC opined macroeconomic impact of COVID-19 is turning out to be more severe than initially anticipated
  • Various sectors of economy are experiencing acute stress.
  • Economic activity other than agriculture likely to remain depressed in Q1 due to  lockdown * Inflation outlook highly uncertain.
  • Moratorium on term loan instalments extended by another 3 months till Aug 31, 2020.
  •  Lending institutions permitted to allow deferment of interest on working capital facilities till Aug 31.
  • RBI decides to extend time for completion of remittances against imports from 6 months to 12 months for imports made before July 31.
  • RBI extends a line of credit of Rs 15,000 crore to the EXIM Bank.
  • Maximum permissible period of export credit increased to 15 months from 12 months.
  • RBI announces measures to improve functioning of markets and market participants.
  • Forex reserves increase by USD 9.2 bn in 2020-21 (up to May 15) to USD 487 bn.

About RBI-

  • The Reserve Bank of India (RBI) is India’s central bank, which controls the issue and supply of the Indian rupee. RBI is the regulator of the entire Banking in India. RBI plays an important part in the Development Strategy of the Government of India.
  • RBI regulates commercial banks and non-banking finance companies working in India. It serves as the leader of the banking system and the money market. It regulates money supply and credit in the country.
  • Headquarters– Mumbai, Maharashtra
  • Formation– 1 April 1935
  • Deputy Governors– 4 (Bibhu Prasad Kanungo, Mahesh Kumar Jain, Michael Debabrata Patra, one is yet to be appointed)

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