RBI Monetary policy committee

RBI keeps Repo Rate unchanged at 4%; announces additional Measures to boost credit for MSMEs, small businesses, and rural sector

1 year ago

Shaktikanta Das, governor of the Reserve Bank of India (RBI), announced new measures on Friday to combat the impact of Covid-19’s second wave on the economy and financial markets. Das mentioned the steps as part of his announcement on the RBI’s monetary policy, claiming that they were taken based on the central bank’s “continuous assessment ” of the situation.

In the meeting, the Governor of the Reserve Bank of India, Shri Shaktikanta Das has announced that the Policy Repo Rate will remain unchanged at 4% and that the Marginal Standing Facility and Bank Rate will remain at 4.25%. The Reverse Repo Rate too will remain unchanged at 3.35%.

The Governor also announced a set of additional measures with the objective of reviving the economy and mitigating the adverse impact of the second wave of the COVID-19 pandemic.

  1. On-Tap Liquidity Window for Contact-Intensive sectors: A separate liquidity window of Rs. 15,000 Crore is being opened till March 31, 2022 with tenures up to three years, at the repo rate. Under this scheme, Banks can give fresh lending support to hotels, restaurants, travel agents, tour operators, aviation ancillary services, and other services including private bus operators, rent-a-car service providers, event organizers, spa clinics, beauty parlors, and saloons.
  1. Special Liquidity Facility of Rs. 16,000 Crore to SIDBI, for on-lending / refinancing through novel models and structures at Repo Rate, for a period of up to one year. This is to further support the credit requirements of MSMEs, including those in credit-deficient and aspirational districts.
  2. Expansion of coverage of borrowers under Stress Resolution Framework 2.0, by enhancing maximum aggregate exposure threshold from Rs. 25 Crore to Rs. 50 Crore for MSMEs, non-MSME small businesses and loans to individuals for business purposes.
  3. Permission given to Authorized Dealer banks to place margins on behalf of FPI clients for transactions in Govt. securities within banks’ credit risk management framework. This will ease operational constraints faced by Foreign Portfolio Investments and promote ease of doing business.
  4. Regional Rural Banks can now issue Certificates of Deposit (CDs) Further, all issuers of CDs will be permitted to buy back their CDs before maturity, subject to certain conditions. This will facilitate greater flexibility in liquidity management.
  5. National Automated Clearing House (NACH) to be available on all days of the week (currently available only on bank working days), effective from August 1, 2021.  NACH is a popular and prominent mode of direct benefit transfer to a large number of beneficiaries, this measure will enhance customer convenience.

To read the full transcript of RBI Governor’s Address: Click Here

Seema Jain

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