RBI Governor Shaktikanta Das. (PTI)
RBI Monetary Policy August 2020 LIVE Updates: The Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) has decided to keep the repo rate unchanged at 4 per cent, Governor Shaktikanta Das announced on Thursday.
“An accommodative stance of the monetary policy will continue as long as necessary to revive growth and mitigate the impact of the pandemic while ensuring that inflation remains within target going forward. RBI is perhaps the only central bank in the world which has set up a special quarantine facility for continuity of critical operations,” he told reporters.
The central bank also allowed lenders to restructure corporate and MSME loans as well as raised the limit of loans that can be availed against gold ornaments and jewellery.
Meanwhile, the markets are in the green in anticipation of the announcement from RBI. The BSE is currently 250 points up while the NSE is up by 66 points.
Reacting to the RBI announcements, BankBazaar CEO Adhil Shetty said: "For the first time, RBI Governor Shaktikanta Das used the word 'contactless' in an MPR announcement.He was talking about transactions in the context of the ongoing pandemic. This is a word I've stressed on during the crisis. There's greater need to transact digitally, and to avail financial products such as loans and credit cards in a contactless manner to not just cut health risks but also speed up the delivery of much-needed credit with the help of technological innovations such as Video KYC." He added: "We saw a pause on rate cuts. The repo rate has fallen from 6.50 at the start of 2019 to 4.00 at the last bi-monthly review, including 115 basis points in 2020 alone. Inflation has increased. Meanwhile, the transmission of rate cuts have also been substantial: there was a decline of 91 basis points in the WALR between March-June on fresh rupee loans. Therefore, the interest rates we have on loans are the lowest we're going to get for now. If you had been waiting to take a new loan, or refinance existing loans, or make an impactful pre-payment, now would be a good time to do so."
RBI had last revised its policy rate on May 22, in an off-policy cycle to perk up demand by cutting interest rate to historic low
"Stressed MSMEs will be eligible for restructuring debt provided accounts are classified as 'standard' till March 1, 2020. The central bank will amend the priority sector lending guidelines to remove regional disparity. The loans to startups will get the priority sector lending tag," RBI Governor Shaktikanta Das announced.
"It has been decided to provide a window under the June 7, 2019 framework of the RBI to enable lenders to implement resolution plan without change in ownership and in respect of personal loans, while classifying them as standard assets subject to certain conditions," the Governor announced. He added: "This resolution window will lead to preservation of soundness of banking system. A committee under Mr. KV Kamath will be set up to make recommendations to RBI for parameters to be factored into resolution plan."
The RBI Governor said that the policy measures will be announced with the following objectives -- "To enhance liquidity support for financial markets; to further ease financial stress caused by Covid-19 disruptions; to improve the flow of credit; to deepen digital payments systems; facilitate innovations." "Additional special liquidity facility of Rs 10,000 crore will be provided to NABARD (Rs 5,000 crore) and National Housing Bank (Rs 5,000 crore)," he added.
Continuing his address to the media, Das said: "Borrowing costs in the financial markets have dropped lowest in a decade due to abundant liquidity. Commercial papers of NBFCs have softened. NBFCs have access to funding at reasonable costs." He added: "Monetary transmission has improved considerably. There was a decline in weighted average lending rate by 162 basis points for banks during February 2019-June 2020. Out of this, 91 basis points transmission was witnessed between March and June 2020."
"The real GDP growth will remain in the negative zone in first half and in full fiscal," RBI Governor Shaktikanta Das said today.
The Monetary Policy Committee is expecting inflation to remain elevated in the second quarter and thus, providing an ease in the second half of the fiscal, the Governor announced.
"Taking into consideration all factors, the GDP growth in the first half of the year is estimated to remain in the contraction zone. For the year 2020-21 as a whole, real GDP growth is also estimated to be negative," the RBI Governor said.
"An accommodative stance of the monetary policy will continue as long as necessary to revive growth and mitigate the impact of the pandemic, while ensuring that inflation remains within target going forward. RBI is perhaps the only central bank in the world which has set up a special quarantine facility for continuity of critical operations," the central bank's head said.
Addressing the media, Das said the central bank has decided to leave the repo rate at four percent "The monetary policy committee maintains an accommodative stance," he said. He added: "Global economic activity has remained fragile; the surge in Covid cases has subdued early signs of revival."
The Monetary Policy Committee, headed by RBI Governor Shaktikanta Das, has begun addressing the media on the decisions taken during the policy review meeting. Follow this blog for all the latest updates.