Key Highlights Of February MPC Statement

After the much awaited Budget 2020 has been presented, analysts and marketmen have been watchful of the last monetary policy statement of the FY20. All of the 6 members of the MPC committee favoured for a status quo.

Key Highlights Of February MPC Statement

1. Repo rate and stance: While the RBI had a tough task at hand to curb rising inflation that for the December month scaled to over 7% mark on rise in vegetable prices, and push the slowing economy, it took on to control inflation. Thereby, maintaining status quo with repo rate at 5.15%. Repo rate is the rate at which RBI lends short term loans to commercial banks.

The RBI has said it shall continue with accomodative stance as long as possible to support growth. Reverse repo has been unchanged at 4.9%.

MSF Bank rate is at 5.4%.

The Governor says the repeat of status quo should not be seen as a pointer for future rate action.

2. RBI's outlook on growth: Growth forecast has been brought down for FY21, in the range of 5.5-6.0 per cent in H1FY21 and 6.2 percent in Q3FY21.

In December, the RBI's MPC revised growth outlook estimates for FY20 lower to 5% from 6.1% earlier. FY20 GDP target remains at 5%.

3. On Inflation:The central bank increased its CPI inflation forecast to 6.5% for Q4 of 2019-20, 5.4-5% for H1FY21; and 3.2% for Q3FY21, with risks broadly balanced.

"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 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.

4. Relief for real estate announced in MPC decision: In its MPC meet, the RBI has decided to permit extension of date of commencement of commercial operations (DCCO) of project loans for commercial real estate, delayed for reasons beyond the control of promoters. So, if the delay is for genuine reasons, there shall be no downgrade of commercial realty loans.

5. To spur growth: RBI says that it has several instruments at its disposal for addressing the slowdown. Likewise, it has decided to incentivise banks for increasing their lending to some of the sectors, wherein fresh loans to MSME, home loans and vehicle loans shall be exempted from CRR or cash reserve ratio calculation.

The move will loosen up some of the reserves of the bank for lending and reviving demand across these sectors.

Also, the banks will henceforth provide external benchmark linked new floating rate loans to MSMEs.

GoodReturns.in