In the first bi-monthly policy meet of the newly-constituted Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) has left the repo rate unchanged and maintained accommodative monetary policy stance. The accommodative stance of the RBI was on expected lines.
However, as he detailed the decisions taken at the MPC meet, RBI Governor Shaktikanta Das unveiled a number of unconventional measures to boost liquidity and support economic activity while ensuring the government's record borrowing programme goes through smoothly.
In order to facilitate swift and seamless payments in real-time for domestic businesses and institutions, RBI decided to make available the RTGS (Real Time Gross Settlement) system round-the-clock on all days from December.
In December last year, RBI had made available the National Electronic Fund Transfer (NEFT) system on a 24x7x365 basis.
The RBI also rationalised risk weightage on home loans, meaning all new housing loans risk will be linked only to loan to value. This move will likely make more credit available to borrowers, particularly for the higher value loans.
Under the current regulations, differential risk weights are applicable to individual home loans, based on the size of the loan as well as the loan-to-value ratio (LTV).
Ways & Means Advance (WMA) limit for the Centre was kept at Rs 1.25 lakh crore.
On-tap TLTRO for Rs 1 lakh crore at 4 per cent till March 2021 was announced. Besides, OMO worth Rs 20,000 crore will be conducted next week.
In a video live stream, he said RBI will "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". The RBI will conduct special and outright bond purchases
Stating that RBI stands ready to take further measures on liquidity, Das announced Rs 1 lakh crore of targeted long-term funds with tenors of as much as 3 years from the central bank to banks for investing only in corporate bonds, aimed at easing cash crunch at firms.
RBI will buy bonds issued by state governments as a special case and also extended till March 31, 2022, its permission to banks to hold more government bonds without marking to market.
For exporters hit by the pandemic, the RBI discontinued the system-based automatic caution-listing to allow them to realise export proceeds.
