The Reserve Bank of India's (RBI) Monetary Policy Committee (MPC) on Wednesday kept the benchmark repo rate unchanged at 4 percent in the April policy while maintaining an accommodative stance for as long as necessary amid rising inflation. Addressing a media briefing, RBI Governor Shaktikanta Das detailed the MPC's decision. Here are the key points from his speech:

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A. RBI Policy key highlights

Interest rates:

Policy repo rate under the liquidity adjustment facility (LAF) unchanged at 4.0 percent. Consequently, the reverse repo rate under the LAF remains unchanged at 3.35 percent and the marginal standing facility (MSF) rate and the Bank Rate at 4.25 percent.

Policy stance:

The MPC also decided to continue with the accommodative stance as long as necessary to sustain growth on a durable basis and continue to mitigate the impact of COVID-19 on the economy, while ensuring that inflation remains within the target going forward.

On inflation:

CPI for FY22 seen at 5.1 percent, while CPI for Q1FY22 and Q2FY22 seen at 5.2 percent against 5.2-5 percent forecast earlier. The CPI for Q3 is seen at 4.4 percent versus 4.3 percent earlier and Q4 at 5.1 percent. He said expect softening of cereal prices going ahead. Mitigation of price pressure on key food items will depend on supply-side measures, easing of international prices

On GDP:

RBI maintains FY22 growth forecast of 10.5 percent. Das said real GDP growth rate of 10.5 percent for FY22 is retained. See real GDP growth at 22.6 percent in Q1FY22 and 8.3 percent in Q2Fy22. See real GDP growth at 5.4 percent in Q3FY22 and 6.2 percent in Q4FY22.

On growth:

Public investment in the key infra sector is key to revival in economic growth. Economic activity is normalising despite a surge in infection rate. Firms polled in March are optimistic about growth in FY22.

Upside risks:

It comes from speeding of the COVID-19 vaccination programme, gradual release of the pent-up demand and reform measures by the government.

On liquidity:

Governor Das said that RBI is indirectly expanding liquidity. It wants to ensure orderly evolution of the yield curve. Its management has ensured the borrowing of Rs 22 lakh crore by the Centre, states in FY22.

On government securities:

RBI has decided to put in place a secondary market Government Security Acquisition Programme (G-SAP) 1.0 for orderly evolution of the yield curve in FY22. The guv said it is not a one-time measure.

B. RBI non-policy measures

On TLTRO Scheme:

RBI has extended the deadline for TLTRO on Tap Scheme by sixmonths from March 31 to Sep 31, 2021.

On liquidity support:

The central bank has extended a special refinance facility of Rs 50,000 crore to all Indian financial institutions for fresh lending. The amount is divided between NABARD (Rs 25,000 crore), SIDBI (Rs 15,000 crore), and NHB (Rs 10,000 crore).

On Payment banks:

The central bank has also enhanced the limit of payment banks’ maximum balance per customer at end of the day from Rs 1 lakh to Rs 2 lakh. RBI will also extend the membership of RBI-operated RTGS and NEFT to payment systems operators gradually.

On Asset Reconstruction Companies:

RBI will constitute a committee to review the working of ARCs and recommend suitable growth measures.

On PSL Classification:

RBI has extended PSL classification for on-lending by banks to NBFCs by six months to September 30, 2021.

On Priority Sector lending guidelines:

The central bank has enhanced the loan limit against eNWR/NWR from Rs 50 lakhs to Rs 75 lakhs. NWR is Negotiable Warehouse Receipts, e-NWR is electronic-NWR.

On Ways and Means Advances (WMA):

The apex bank has increased the WMA limit for states and UTs by 46 percent – from Rs 32,225 crore to Rs 47,010 crore.

On Financial inclusivity:

The central bank will construct and periodically publish a ‘Financial Inclusion Index’.

On prepaid payment instruments:

RBI proposed to make interoperability mandatory for full-KYC PPIs and for all acceptance infrastructure. It has also decided to permit cash withdrawal from full-KYC PPIs issued by non-banks.

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(Edited by : Ajay Vaishnav)

First Published:Apr 7, 2021 10:42 AM IST