In-line with expectations, the Reserve Bank of India (RBI) kept repo rates unchanged at 4 percent on February 5 and kept the stance 'accommodative'.
The reverse repo rate also kept unchanged at 3.35 percent. MSF and bank rate remain unchanged at 4.25 percent.
The central bank last revised its policy rate on May 22 when COVID-19 posed an unprecedented challenge, hammering the economy. The central bank has cut policy rates by 115 basis points since February 2020.
RBI Governor Shaktikanta Das said the MPC voted unanimously to keep the policy rates unchanged. RBI Governor also said the accommodative stance may continue as long as required as the need of the hour is to continue supporting growth.
RBI Monetary Policy LIVE Updates
"Inflation has eased below the tolerance level of 6 percent. Outlook on growth has improved significantly. MPC has judged that the need for the hour is to continue supporting growth. Signs of recovery have strengthened further and the list of normalising sectors is expanding," said RBI Governor Shaktikanta Das.
Here are 8 key highlights from RBI MPC outcome:
Stable inflation: Core inflation outlook is influenced by cost-push pressure seen in recent months, said RBI.
CPI moved below 6 percent supported by a fall in vegetable prices and favourable base. CPI projection is revised to 5-5.2 percent in H1FY22 against 4.6-5.2 percent earlier.
RBI revised the projection for CPI to 5.2 percent for Q4FY21 from 5.8 percent earlier.
Positive growth outlook: With the beginning of vaccination drive, economic growth is likely to pick pace, RBI said.
"2021 has begun with strong positive growth on the back of vaccination. Signs of recovery have strengthened further since the last MPC meet," said governor Das.
RBI pointed out the consumer confidence is reviving and business expectations of the manufacturing sector are upbeat.
"FDI & FPI have surged in recent months, reposing faith in recovery in the economy and non-food bank credit, commercial paper sales are picking up," Das said.
RBI expects FY22 GDP growth at 10.5 percent.
TLTRO available to NBFCs: RBI Governor Shaktikanta Das said funds from banks via TLTRO (targeted long-term repo operations) scheme now available to NBFCs.
CRR normalisation: RBI said it has decided to gradually restore CRR in two phases in a non-disruptive manner to 3.5 percent w.e.f March 27 and 4 percent w.e.f May 22, 2021.
"CRR normalisation will open up space for a variety of market operations of the RBI to inject additional liquidity," Das said.
Extention of MSF facility: RBI said the marginal standing facility (MSF) will be available up to September 30, 2021 to provide comfort to banks on their liquidity requirements.
SLR holdings in HTM category: The RBI said in order to provide certainty to the market participants in the context of the borrowing programme of the centre and states for 2021-22, it has now been decided to extend the dispensation of enhanced HTM of 22 percent up to March 31, 2023, to include securities acquired between April 1, 2021 and March 31, 2022.
Gilt accounts for retail investors: RBI proposed to provide retail investors with online access to the government securities market – both primary and secondary – directly through the Reserve Bank (‘Retail Direct’).
"This will broaden the investor base and provide retail investors with enhanced access to participate in the government securities market," said Das.
This is a major structural reform placing India among select few countries which have similar facilities. This measure together with HTM relaxation will facilitate the smooth completion of the government borrowing programme in 2021-22.
Read more: Retail investors can take direct exposure in G-Secs.
Integrated Ombudsman Scheme: To make the ombudsman mechanism simpler, efficient and more responsive, RBI will introduce centralised processing of grievances following a ‘one nation one ombudsman’ approach.
"This is intended to make the process of redress of grievances easier by enabling the customers to register their complaints under the integrated scheme, with one centralised reference point," said Das.
The integrated ombudsman scheme will be rolled out in June 2021.