The RBI’s Monetary Policy Committee (MPC) conducted its 1st bi-monthly monetary policy meeting for FY2021-22 from April 5-7, 2021.
On the basis of an assessment of the evolving macroeconomic situation, the Monetary Policy Committee (MPC) at its meeting today decided to:
Part A: RBI’ s Policy decision Rationale:
Headline inflation increased to 5.0% in February after having eased to 4.1% in January 2021.
The MPC expects CPI outlook to be subjected to both upside and downside pressures such as:
Based on the above factors, the MPC has provided the following outlook for CPI Inflation, with risks broadly balanced:
|CPI Inflation Outlook||Projections|
|1st bi-monthly policy FY22||5.00%||5.20%||5.20%||-||4.40%||5.10%|
|5st bi-monthly policy FY21||5.20%||-||-||5.0%-5.2%||4.30%||-|
The MPC expects real GDP to be based on the following factors:
Based on the above factors, the MPC has provided the following outlook for Real GDP growth:
|GDP Growth Outlook||Projections|
|1st bi-monthly policy FY22||10.50%||26.20%||8.30%||-||5.40%||6.20%|
|5th bi-monthly policy FY21||10.50%||-||-||8.30%-26.20%||6.00%||-|
RBI Governor announced additional liquidity measures in line with its accommodative policy stance. These liquidity measures are explained in Part B.
Part B: Key Statements on Developmental and Regulatory Policies:
1. LTRO on Tap Scheme – Extension of Deadline
RBI has extended the TLTRO on Tap Scheme, which was previously available up to March 31, 2021, by a period of six months, i.e., till September 30, 2021.
2. Liquidity Facility for All India Financial Institutions
In consonance with the policy objective of nurturing the still nascent growth impulses, it has been decided to extend fresh support of Rs 50,000 crore to the All India Financial Institutions (AIFIs) – the National Bank for Agriculture and Rural Development (NABARD); the Small Industries Development Bank of India (SIDBI); the National Housing Bank (NHB); and the EXIM Bank for new lending in 2021-22. Accordingly, NABARD will be provided a special liquidity facility (SLF) of Rs 25,000 crore for a period of one year to support agriculture and allied activities.
3. Asset Reconstruction Companies – Constitution of a Committee
BI has proposed to constitute a Committee to undertake a comprehensive review of the working of ARCs in the financial sector ecosystem and recommend suitable measures for enabling such entities to meet the growing requirements of the financial sector.
4. Permitting banks to on-lend through NBFCs
With a view to ensure continued availability of credit to Agriculture/MSME/Housing sectors to aid faster economic recovery, it has been decided to extend the Priority Sector Lending (PSL) classification for lending by banks to NBFCs for ‘on-lending’ to the above sectors for six months, i.e. up to September 30, 2021.
The next meeting of the MPC is scheduled during June 02 - June 04.