The real GDP growth will remain in the negative zone in first half and in full fiscal
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Mumbai :
The Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) headed by Governor Shaktikant Das has decided to keep the repo rate unchanged at 4 per cent, Governor announced on Thursday.
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.”
“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.
Since February, the Reserve Bank of India has already reduced the repo rate by a total of 115 basis points.
”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.
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.
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 National Banking Finance Commission (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 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.
“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 KV Kamath will be set up to make recommendations to RBI for parameters to be factored into resolution plan.”
“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.
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
