RBI Monetary Policy LIVE Updates: Repo rate kept unchanged

Reserve bank of India

NEW DELHI : The Reserve Bank of India (RBI) announced its sixth bi-monthly monetary policy statement for 2019-20 today in which the repo rate was left unchanged, as was widely expected. The Monetary Policy Committee (MPC), led by Governor Shaktikanta Das, said it has decided to keep the policy repo rate unchanged at 5.15% and persevere with the accommodative stance as long as necessary to revive growth, while ensuring that inflation remains within the target.

RBI monetary policy Live updates:

The share market rose after RBI MPC meeting. Sensex climbed 0.4% to 41,297.81 as of 12:14 p.m. , after briefly erasing an intraday gain before the rate decision. The NSE Nifty 50 Index advanced 0.3%.

To give a fillip to digital banking and enabling regional rural banks (RRBs) to provide cost effective and user-friendly solutions to their customers, it has been decided to allow RRBs, like other commercial banks, to act as merchant acquiring banks, using Aadhaar Pay – BHIM app and POS terminals.

Monetary transmission across various money market segments and the private corporate bond market has been sizable, RBI Governor Shaktikanta Das said.

The Reserve Bank said it will put in place a framework for establishing a Self-Regulatory Organisation (SRO) for digital payment system by April 2020. This will foster best practices on security, customer protection and pricing, among others.

RBI has decided to link interest rate of loans given to medium enterprises also to an external benchmark from April.

RBI said the monetary transmission has improved in sectors where new floating rate loans have been linked to the external benchmark.

“Economic activity remains subdued and the few indicators that have moved up recently are yet to gain traction in a more broad-based manner. Given the evolving growth-inflation dynamics, the MPC felt it appropriate to maintain status quo,” the Monetary Policy Committee (MPC) said.

All six committee members of RBI MPC voted in favour of the decision.

Clearing of cheques could soon be faster as the RBI has decided to extend the Cheque Truncation System (CTS) to all over India.

The MPC has observed that the economy continues to be weak and the output gap remains negative.

RBI said overall the inflation outlook remains highly uncertain. “Accordingly, the MPC will remain vigilant about the potential generalisation of inflationary pressures as several of the underlying factors cited earlier appear to be operating in concert,” the MPC said in its statement.

RBI MPC policy statement blames the unusual spike in onion prices for the surge of inflation above the upper tolerance band around the target in December 2019.

The RBI has revised CPI inflation projection upwards to 6.5% for Q4 of 2019-20, 5.4-5% for H1 of 2020-21; and 3.2% for Q3 of 2020-21, with risks broadly balanced.

GDP growth for FY 2020-21 has been projected at 6% – in the range of 5.5-6% in H1 and 6.2% in Q3

RBI said these decisions are in consonance with the objective of achieving the medium-term target for consumer price index (CPI) inflation of 4 per cent within a band of +/- 2 per cent, while supporting growth.

RBI has also decided to continue with the accommodative stance as long as it is necessary to revive growth, while ensuring that inflation remains within the target.

RBI’s policy repo rate current stands at 5.15%.

The RBI is not expected to cut interest rates before June.

“The MPC will weigh limited explicit fiscal support for growth, still mixed signs of growth pickup and emerging headwinds to growth from global developments such as the health scare in China,” said A. Prasanna, chief economist at ICICI Securities Primary Dealership in Mumbai. “In this backdrop, the MPC might decide to wait for more data and clarity before making up its mind in April.”

RBI can raise its near-term forecasts after inflation surged to 7.35% in December, the fastest pace in more than five years. The RBI’s previous projection was for price growth of 4.7%-5.1% in the six months through March 2020 and 3.8%-4% in the first half of the next fiscal year.

All 37 economists in a Bloomberg survey predict the benchmark repurchase rate will stay at 5.15%, the lowest level since 2010.

Investors will be looking for cues related to economic growth from the RBI statement.

RBI’s MPC meeting comes just after the release of the Budget and Economic Survey.

The three-day MPC meeting began on Tuesday.

RBI will release its policy statement at 11:45 am while the MPC will hold a press conference from noon.

News Source: livemint

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