Moneycontrol PRO
Upcoming Event:Super25 3.0- India’s Largest Online Stock Traders Conference brought to you by Moneycontrol Pro & Espresso
you are here: HomeNewsBusiness

RBI remains committed to COVID fight, keeping inflation within target, says Deputy Governor Michael Patra

The RBI’s measures have contributed significantly in engineering the turnaround in the Indian economy, supported by rising financial inclusion and digitalisation, Patra said while delivering the C D Deshmukh Memorial Lecture organised by the Council for Social Development, Hyderabad

January 28, 2022 / 12:30 PM IST

The Reserve Bank of India (RBI) remains committed to revive and sustain growth and continue to mitigate the impact of COVID-19 on the economy, while ensuring that inflation remains within target, Deputy Governor Michael Patra said on January 28.

The RBI’s measures have contributed significantly in engineering the turnaround in the Indian economy, supported by rising financial inclusion and digitalisation, Patra said while delivering the CD Deshmukh Memorial Lecture organised by the Council for Social Development, Hyderabad.

"We are on course to be among the fastest growing economies of the world, but there is far to go. Private consumption and investment are still work-in-progress. The restoration of livelihoods and the revival of MSMEs is a formidable task that lies ahead," Patra said.

The MPC has a mandate to keep inflation within a band of 2%-6%.

Since the start of the pandemic, the RBI has unveiled a series of measures including announcing special liquidity measures for different segments of the economy and keeping the monetary stance accommodative to signal the markets that the RBI is on a growth-supportive stance.

Close

The impact of the measures taken by the RBI is still unravelling and even when the outcomes have fully formed, a one-to-one correspondence may be difficult to establish, given the many moving parts that are involved, Patra said.

“Notwithstanding this caveat, however, the overall state of the economy and of financial markets – which is what these measures sought to address – provides some evidence of the efficacy or otherwise of the RBI’s pandemic response,” said Patra.

Patra said the pandemic continues to shape the future, but the RBI remains armed and battle ready. “Continuously evaluating highly volatile and uncertain conditions and remaining prepared to protect the economy from shocks, the RBI has committed all its instruments to this objective, using conventional measures and fashioning new ones, as the pandemic experience showed,” Patra said.

RBI's pandemic response

From March 27, 2020 the RBI unfurled a series of of measures numbering more than a hundred  measures to address pandemic-induced dislocations and constraints, both system level and also specific to sectors, institutions and financial instruments.

In terms of conventional measures, the policy repo rate was reduced by an unprecedented 115 bps in two phases.

Also, the interest rate on the fixed rate reverse repo rate under the liquidity adjustment facility (LAF), under which market participants deposit their surpluses with the RBI, was reduced cumulatively by 155 bps and it became the effective anchor for the evolution of money market rates and even longer-term interest rates.

Further, banks’ access to liquidity under the marginal standing facility, a lending window which is priced at 25 bps above the policy repo rate, was expanded by close to Rs1,37,000 crore. System level liquidity was also enhanced though large scale open market purchase operations and a one percentage point reduction in the cash reserve ratio (CRR) that freed up banks’ resources to the extent of Rs1,37,000 crore.



Download your money calendar for 2022-23 here and keep your dates with your moneybox, investments, taxes

Dinesh Unnikrishnan is Deputy Editor at Moneycontrol. Dinesh heads the Banking and Finance Bureau at Moneycontrol. He also writes a weekly column, Banking Central, every Monday.
first published: Jan 28, 2022 11:57 am
Sections
ISO 27001 - BSI Assurance Mark