Accommodative stance maintained; more liquidity boosting measures
At the same time, the monetary policy committee (MPC) also left the reverse repo rate, the rate at which the banks park their surplus funds with RBI, at 3.35 per cent.
RBI also decided to maintain ‘accommodative stance’ on the policy indicating that the regulator has kept the chances open for further rate cuts if the situation warrants.
The RBI Governor Shaktikanta Das in his speech said, “The MPC evaluated domestic and global macroeconomic and financial conditions and voted unanimously to leave the policy repo rate unchanged at 4 per cent. It also decided to continue with the accommodative stance of monetary policy as long as necessary – at least during the current financial year and into the next year – to revive growth on a durable basis and mitigate the impact of COVID-19, while ensuring that inflation remains within the target going forward.”
Governor Das also informed that the Marginal Standing Facility (MSF) rate and the Bank rate would remain unchanged at 4.25 per cent even as the reverse repo rate stands unchanged at 3.35 per cent.
All members of the MPC – Dr Shashanka Bhide, Dr Ashima Goyal, Prof Jayanth R Varma, Dr Mridul K Saggar, Dr Michael Debabrata Patra and Shaktikanta Das – unanimously voted for keeping the policy repo rate unchanged.
Liquidity boosting measures
Das said that a special liquidity facility of Rs 10,000 crore will be provided at the policy repo rate, which will include Rs5,000 crore facility via National Housing Bank (NHB) in a bid to shield the housing sector from liquidity disruptions.
Another Rs5,000 crore facility was announced via National Bank for Agriculture and Rural Development (NABARD) to lower the stress being faced by smaller non-bank finance companies (NBFCs) and micro-finance institutions (MFIs).
The governor said that the stressed MSME borrowers will be made eligible for restructuring their debt under the existing framework, provided their accounts with the lender concerned were classified as standard as on March 1, 2020. This restructuring will have to be implemented by March 31, he said.
At present, loans sanctioned by banks against pledge of gold ornaments and jewellery for non-agricultural purposes could not exceed 75 per cent of the value of gold ornaments and jewellery. Das on Thursday said that the RBI has decided to increase the permissible loan to value ratio (LTV) for such loans to 90 per cent.
Stating that the inflation may remain elevated in the second quarter, the governor added that the inflationary pressures were evident across all subgroups in July.
The RBI governor was conspicuous by his silence on issue of extension of moratorium even as the moratorium has ended on August 31.
Inflation is on the rise in the economy. Consumer price index (CPI) inflation averaged at 6.7 per cent in March quarter and little lower at 6.5 per cent in June quarter.
Overall non-food credit of the banking industry rose 6.7 per cent YoY to Rs90 lakh crore in June. It was flat compared with May and less than the average growth of 8.4 per cent seen in last 12 months.