RBI Monetary Policy: Key Highlights (4th Dec 2020)

RBI Monetary Policy: Key Highlights (4th Dec 2020)

The RBI recently held its Monetary Policy Committee meet. During the meet, the Reserve Bank of India has kept the repo rate unchanged at 4%. Repo rate is the rate at which RBI lends to banks. The Reverse Repo Rate is to continue at 3.35%.

Repo Rate 4%
Reverse Repo Rate  3.35%
Marginal Standing Facility(MSF) Rate 4.25%
Bank Rate 4.25%
Cash reserve Ratio(CRR) 3%
Statutory Liquidity Ratio(SLR) 18%

Key Highlights of the During  meeting

  • The meeting concluded that the “Accommodative Stance” of monetary policy is to continue. Accommodative Stance means the apex bank will keep cutting rates in order to inject money in to the financial system. When the accommodative stance of the bank is addressed as “neutral”, it means that RBI may alter rates in any direction to control the flow of the currency in the country.
  • The bank rate and the Marginal standing facility were kept unchanged at 4.25%
  • Real GDP for the year 2020-21 has been projected at -7.5% from -9.5% .
  • The Q3 GDP of 2020-21 was projected to grow at 0.1%. In Q4, the GDP is expected to grow at 0.7%.
  • The CPI Inflation for Q3 was projected at 6.8% and for Q4 at 5.8%.
  • The limit of contactless card transaction has been raised from Rs 2,000 to Rs 5,000 per transaction. This is to be implemented in January 2021.
  • The RTGS (Real Time Gross Settlement) system is to be made 24/7 in few days.

On Inflation

  • CPI inflation projection at 6.8% Q3 FY21, and at 5.8% for Q4 FY21
  • CPI inflation seen at 5.2 to 4.6% in H1 FY22, with risks broadly balanced
  • Alert: RBI has projected CPI inflation at 6.8% for Q2FY21, 5.4-4.5% in 2H FY21, 4.3% in Q1 FY22 in Oct policy

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