RBI’s Monetary Policy Committee (MPC) – Key Highlights : Reserve Bank of India (RBI)’s Monetary Policy Committee (MPC) met today to discuss steps to counter the slowdown induced by COVID-19 outbreak and the subsequent economic lockdown.
The meeting of the six-member MPC took place virtually, and for the first time outside its bi-monthly calendar since the committee was formed in February 2016.
Key Highlights of RBI’s Monetary Policy Committee
- In view of COVID-19 pandemic, MPC advanced its meeting and met on March 24, 26 and 27.
- MPC voted by 4:2 majority to reduce policy repo rate by 75 bps to 4.4 percent, and reverse repo rate by 90 bps.
- Cash reserve ratio (CRR) cut by 100 basis points to 3 percent
- SLR to be reduced by 3 percent
- Total measures will result in total liquidity injection of Rs 3.74 lakh crore to system
- All banks including scheduled commercial banks, local area banks, small finance banks, regional rural banks, non-banking financial companies, housing finance companies permitted to allow a moratorium of 3 months on payment of installments as of March 1, 2020
- LTRO money can be invested in commercial paper, which will not be marked-to-market, and will be classified as held-to-maturity
- CRR daily maintenance level to be reduced to 80 percent
- Rs 1.37 lakh crore to be released into system because of CRR reduction
- Incremental capital conservation buffer implementation deferred from March 30, 2020 to Sep 30, 2020
- “The decision of MPC was warranted by disruptive force of Coronavirus,” says RBI Governor Shaktakanta Das. “We have quarantined 150 of our staff as part of our business continuity plan.”
- India’s H2 GDP growth target of 4.4 percent is at risk. FY21 outlook is highly uncertain
- Inflation may weaken because of fall in demand
- “Have seen some withdrawals from small private sector banks. Want to reassure everyone that banks are completely safe”.
