Non-Policy Announcements

1. On Tap TLTRO – Extension of Sectors and Synergy with ECLGS 2.0​

*Banks can avail funds from RBI under TLRO to invest in sectors under ECLGS 2.0

* Banks can invest in papers, give loans to stressed sectors covered under ECLGS 2.0

2. Regional Rural Banks permitted to access LAF window, call money market

3. Commercial & cooperative banks to not make any dividend pay-out from the profits of FY20

4. Different categories of NBFCs to be allowed to declare dividend as per a matrix of parameters

5. Discussion Paper on Scale-based Regulatory Framework for NBFCs by Jan 15, 2021

6. Risk-Based Internal Audit to be extended to UCBs, NBFCs

7. Harmonisation of guidelines on appointment of statutory auditors for commercial banks, UCBs and NBFCs

Dec 4, 2020 12:25 PM

RBI KEY POLICY ANNOUNCEMENTS

KEY POLICY ANNOUNCEMENTS

> Repo rate left unchanged at 4%; status quo maintained for the third consecutive policy

> MPC maintains accommodative stance at least during current FY & into the next year

>All MPC members voted unanimously for a status quo, accommodative stance

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

>MPC of view that inflation is likely to remain elevated, barring transient relief in the winter months

>Monetary policy constrained at the current juncture from using the space available to act in support of growth

>Further efforts necessary to mitigate supply-side driven inflation pressures

On Growth

>Real GDP growth projection for FY21 revised to -7.5% from -9.5% earlier

>GDP growth seen at 0.1% in Q3 FY21 and 0.7% in Q4 FY21

>GDP growth seen at 6.5-21.9% in H1 FY22, with risks broadly balanced

>Signs of recovery far from being broadbased; dependent on sustained policy support

>Recovery in rural demand expected to strengthen further

>Urban demand recovery also gaining momentum

>Positive impulses clouded by a possible rise in infections in some parts of the country

>Private investment still slack and capacity utilisation has not fully recovered

>Prospects have brightened with the progress on the vaccines ​

Dec 4, 2020 12:17 PM

Perspective by Joseph Thomas, Head of Research - Emkay Wealth Management on RBI's MPC announcement

“The RBI policy announcement reflects the determination of the central bank to continue with the accommodative policy, with the base rate unchanged at 4 %, while being cautious about the inflationary pressures that are building up. But growth gets the priority once again, with inflation projected to be lower in Q4 and H1 FY22. That all the liquidity measures initiated earlier will continue to be in force, is a consolation, especially in a high inflation scenario. The growth projections too mirror the gradually improving ground conditions, with the overall growth for this year put at -7.50 %, with mildly positive growth for Q3 and Q4. The features and contents of the policy gives the reassurance that lower rates and the plenty in liquidity will continue for a longer time period, till the time inflation rises so much as to derail it. The policy is supportive of both equity and fixed income markets, with its moderating implications for rates.”

Dec 4, 2020 12:06 PM

Rate sensitive stocks rise post RBI policy announcement: Bank, Realty indices up 1%

Shares of interest-rate sensitive sectors- financials, realty and automobiles, were trading higher on Friday after the RBI MPC kept the repo rate unchanged at 4 percent while maintaining the 'accommodative' stance for this year and the next. The overall sentiment was upbeat after the RBI revised FY21 GDP growth to -7.5 percent from -9.5 percent earlier.

The banking and realty indices rose over 1 percent each post the policy decision while the Nifty Fin Services and Nifty Auto indices were also up 0.8 percent and 0.6 percent, respectively. In comparison, the benchmark Nifty also gained 0.6 percent to hit a new all-time high. Among stocks, major banking names like ICICI Bank, Axis Bank, HDFC Bank, Kotak Bank and SBI were all positive, up between half a percent to 2 percent. Most constituents in the auto index also rose post the policy. M&M, Maruti, Bajaj Auto, Tata Motors, and Hero Moto added 0.5-1 percent each. Realty players also cheered the RBI announcements. Omaxe, Godrej Properties, DLF, Sobha, and Sunteck Realty gained 1.7-5 percent.

Dec 4, 2020 11:54 AM

Quote on RBI MPC by Jimeet Modi, Founder & CEO Samco Group

"RBI maintained status quo in-line with street expectations and GDP numbers too have been revised upwards. Although increasing inflationary tendencies have been acknowledged, little seems to have been done to contain the price index. In Fact it is assumed that CPI will cool down to below 5% in H1 of FY21-22. In all likelihood, inflation isn’t going lower given the massive helicopter money across the world created by central banks and run up in commodity prices such as crude, base metals. It is likely to remain elevated given that import restrictions are in place to support the domestic economy. Such a growth recipe will have unintended consequences of higher inflation not only in India but across the world which will be the bigger animal to tame a few quarters down the line. However, in the near term this will support recovery in financial markets and will keep the bulls charged in the capital markets."

Dec 4, 2020 11:42 AM

Sanjay Kumar, CEO & MD, Elior India on RBI Policy:

“The RBI announcement comes in on expected lines and signals the revival in the economy. What will be interesting to observe is the net credit outflow that takes place over this quarter. At the same time, RBI has been a bit benign in terms of monitoring inflation indicating that it could live with some inflationary pressures in the coming quarters. We expect that this would be its continued stance going into the budget and now hope for a fiscal stimulus in 2021.”

Dec 4, 2020 11:30 AM

View on RBI Policy by Ashish Shanker, Deputy MD and Head of Investment, Motilal Oswal Private Wealth Management

“RBI policy was on expected lines. They have prioritised growth over inflation. This is an acknowledgment that inflation drivers seem to be more supply side led. An accommodative liquidity stance will ensure access to liquidity will not be a challenge and the ongoing recovery continues to gather steam. This will help push through govt borrowings in a year where the revenues are under pressure. Guidance is better than earlier on growth and flows. Positive for markets.”

Dec 4, 2020 11:22 AM

View on RBI Monetary Policy Deepthi Mathew, Economist at Geojit Financial Services

"It was in the expected line with the RBI keeping the rates unchanged and continuing with the accommodative stance. The extension of the accommodative stance to the next financial year has cheered the market. However, the fear of a rising inflation rate is evident in the RBI governor's address. The supply-side issues, demand recovery, and inflow of foreign funds could fuel retail inflation"

Dec 4, 2020 11:13 AM

Dec 4, 2020 11:03 AM

Markets hit record high post policy announcement

The Sensex hit 45,000 for first time ever after RBI upgraded its GDP forecast for FY21 at -7.5 percent vs -9.5 percent projected earlier. The Sensex rose 370 points higher to 45,002 while the Nifty50 index edged higher to its record levels of 13,240, up 107 points. HDFC Bank, SBI and ICICI Bank contributed the most gains along with UltraTech Cement, which rallied over 5.5 percent higher.

Dec 4, 2020 10:50 AM

RBI Governor on banking:

> RTGS will soon be made 24X7 in next few days

> Propose to enhance limits for con-tactless payments from Rs 2000 to Rs 5000 from Jan

Dec 4, 2020 10:35 AM

Market Update: MARKETS AT RECORD HIGH, SENSEX HITS 45,000

Dec 4, 2020 10:32 AM

RBI Governor proposes to expand on-tap TLTROs to cover other sectors

Dec 4, 2020 10:32 AM

RBI Governor: Will release a discussion paper on scale-based supervisory model for NBFCs before Jan 15, 2021

Dec 4, 2020 10:29 AM

RBI tells commercial and co-op banks not to declare dividend for FY21

Commercial and co-op banks will not give out dividends this year and retain all the profits, the governor said.It added that RBI will introduce risk-based internal audits in large urban co-op banks

Dec 4, 2020 10:24 AM

Load more