RBI – REASSSURES “MAIN HOON NA”

Reassuring the markets – that’s the most important message that we got from the RBI Governor, Shaktikanta Das’s speech today. A pragmatic policy, with commitment to maintain liquidity in the market, while ensuring that the borrowing cost remains lower for the Center, RBI has ticked all the boxes, under the current volatile circumstances.

The threat of the surging pandemic is most certainly a huge factor at play – that’s also a loud message that we get from today’s announcement.

A quick look at the announcements made today:

Maintains status quo on the benchmark repo rate — the rate at which the central bank lends short-term funds to banks at 4%.

Kept its accommodative monetary stance unchanged given the fragile economic recovery

On CPI – FY22 at 5.1%; Q1 and Q2FY22 at 5.2% v/s earlier 5.2 – 5%; Q3FY22 at 4.4% v/s 4.3% earlier and Q4FY22 at 5.1%.

Real GDP growth for FY22 is retained at 10.5% 

Vaccine distribution and efficacy key to global economic recovery

New Liquidity support of Rs 50,000 crore for fresh lending during 2021 to national fin institutions – Rs.25,000 crore to NABARAD; Rs 10,000 crore to NHB and Rs 15,000 crore to SIDBI.

TLTRO scheme is being extended by 6 months, up to September 30, 2021- objective to ensure that yields are anchored.

Bank lending to registered NBFCs other than MFIs under priority lending extended

Centralised payment systems like NEFT and RGTS to be extended beyond banks

Under ECB framework, limit for parking of unused ECB proceeds in India extended

Priority sector lending limit enhanced from Rs.50 lakh to Rs.75 lakh per borrower

To measure the extent of financial inclusion in the country, RBI will construct and periodically publish a “Financial Inclusion Index” (FI Index).

The market has taken the pandemic and the RBI policy in its stride, staying in the green. This is an over-and-done-with event and the market is now looking ahead at the earnings season, starting next week.