RBI Monetary Policy: Key Takeaways of RBI Policy Meet

The Monetary Policy Committee (MPC) has agreed to maintain the status quo and retain the repo rate at 4%. 3.35 percent will remain the reverse repo rate. Governor of the Reserve Bank of India (RBI) Shaktikanta Das stated that the monetary stance remains "accommodative." The central bank was widely expected to maintain interest rates at their current levels.

Major Highlights of RBI Policy Meet:

• The IMPS transaction limit has been increased from Rs 2 lakh to Rs 5 lakh.
• Governor of the Reserve Bank of India (RBI) Shaktikanta Das stated that the central bank is optimistic about the 9.5 percent GDP growth forecast for FY22.
• SLTRO extended to December 2021, encouraging borrowers.
• "The CPI inflation momentum is slowing, and a favorable base effect in the coming months could result in significant inflation softening," stated RBI Governor Shaktikanta Das. CPI inflation is expected to reach 5.3 percent this year, according to the central bank. He went on to say that the RBI is dedicated to keeping inflation near the target.
• Internal Ombudsman Scheme for NBFCs with a higher level of customer interaction, to improve internal grievance redress mechanisms.
• Auctions of the Variable Reverse Repo (VRR) will be increased from Rs 4 trillion to Rs 6 trillion every two weeks. RBI may hold a 28-day VRR auction in addition to the 14-day VRR auctions. The amount of liquidity absorbed in the first week of December through fixed-rate auctions is expected to be about Rs 2-3 trillion.
• As a signal of liquidity tightening, investment banks such as Citi have proposed that the RBI may consider raising the reverse repo rate by 15-20 basis points. The MPC, however, has refrained from making any modifications in light of the uncertainties created by Evergrande and US inflation.
• For the eight consecutive meets, MPC maintains its repo rate of 4%. MPC maintains its 'accommodative' stance, with reverse repo at 3.35 percent.
• The MPC voted 5-1 to keep the accommodative stance in place for as long as it is needed to maintain long-term growth and keeping inflation under control.
• CPI inflation was lower than expected in July-September, according to the Governor of the Reserve Bank of India.
• Small finance banks, or SFBs, play a vital role in providing last-mile financing. As a result, the Rs10,000 crore on-tap LTRO plan for SFBs has been extended from October 21 to December 21. This might be expanded to improve last-mile delivery.
• Governor adds that growth impulses appear to be improving.
• Urban demand should be boosted by pent-up demand and the festival season. According to RBI Governor, the recovery in demand accelerated in August and September.
• Imports of capital goods have increased, indicating resurgence inactivity, according to RBI Governor Shaktikanta Das.