First Bi-Monthly Monetary Policy Statement 2019-20
On the basis of an assessment of the current and evolving macroeconomic situation at its meeting today, the Monetary Policy Committee (MPC) decided to:
- Reduce the policy repo rate under the liquidity adjustment facility (LAF) by 25 basis points to 6.0 per cent from 6.25 per cent with immediate effect.
- the reverse repo rate under the LAF stands adjusted to 5.75 per cent,
- the marginal standing facility (MSF) rate and the Bank Rate to 6.25 per cent
The MPC also decided to maintain the neutral monetary policy stance.
Important Data – First Bi-Monthly Monetary Policy Statement 2019-20.
- The second advance estimates for 2018-19 released by the Central Statistics Office (CSO) in February 2019 revised India’s real gross domestic product (GDP) growth downwards to 7.0 per cent from 7.2 per cent in the first advance estimate
- GFCF to GDP ratio rising to 33.1 per cent in Q3:2018-19 against 31.8 per cent in Q3:2017-18, supported primarily by the government’s thrust on the road sector and affordable housing
- Retail inflation, measured by y-o-y change in the CPI, rose to 2.6 per cent in February
- Total durable liquidity injected by the Reserve Bank through OMOs aggregated ₹2,98,500 crore (₹2,985 billion) for 2018-19
- The Reserve Bank conducted long-term foreign exchange buy/sell swaps of US$ 5 billion for a tenor of 3 years on March 26, 2019, thereby injecting durable liquidity of ₹34,561 crore (₹346 billion) into the system
- India’s foreign exchange reserves were at US$ 412.9 billion on March 31, 2019
Key Development and Regulatory policies
- Additional 2.0 percent of SLR to be reckoned as Level 1 High Quality Liquid Assets (HQLAs) for the purpose of computing the LCR of banks. While this move will harmonise the liquidity requirements of banks with the LCR, it will also immediately release additional liquidity for lending by the banks
- A Committee will be constituted that will assess the state of housing finance securitisation markets in India; study the best international practices as well as lessons learnt from the global financial crisis; and propose measures to further develop these markets in India
- The Reserve Bank will set up a Task Force to study the relevant aspects, including best international practices and to propose measures for developing a thriving secondary market for corporate loans in India.
- The Reserve Bank, in consultation with the Government and SEBI, shall open a separate channel for international investors by allowing them to invest through International Central Securities Depositories (ICSDs).
- The non-deposit taking systemically important Non-Banking Financial Companies (NBFCs-NDSI) in the category of Investment & Credit Companies (ICCs) will be made eligible to apply for grant of Authorised Dealer Category II licence.
- The Reserve Bank is will widen the existing NBFC-Ombudsman scheme, introduced on February 2018, to cover the customers of non-deposit taking NBFCs registered with RBI and having asset size of Rs 100 crore and above
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