Rbi Monetary Policy - signals growth revival and aims to reduce interest rates indirectly

Monetary Policy Announced 

The Reserve Bank of India Governor - Shaktikanta Das announced Monetary Policy Committee decisions at 10 am today.  The central bank has kept reporting rates unchanged at 4 percent and reverse repo rate at 3.35 percent.

RBI also said that its stance is "accommodative" for as long as required for "growth".

The Growth - worldwide has declined due to Wuhan Corona Virus Pandemic and Central Banks all over the world have taken steps to revive growth. 

Economy Showing Signs of Improvement 

RBI underscored that while Covid-19 remains a threat, the economy os showing signs of improvement. RBI sees FY21 GDP contracting by 9.5%.  PMI (Purchasing Managers Index) rose to 56.9; the highest since January 2020.

Additional Measures 

RBI announced certain additional measures which are intended to 

• enhance liquidity support for financial markets 
• regulatory support to improve credit to certain specific sectors 
• provide boost to exports
• deepen financial inclusion and facilitate ease of doing business by upgrading payment system services.

Open Market Operations by the RBI

The RBI has reiterated the non-disruptive conduct of the government borrowing programme.  To this effect the OMO amounts have been increased to 20,000 crores. 
This means that RBI will ensure that money is available to banks ( it will lend monies) at cheaper rates. This should bring down the interest rates (loan rates) in the financial system in India.  
Lower borrowing costs, will then enable more loans being taken by business.  It will also mean lower interest rates for loans being taken by consumers to buy goods.  All this is positive for the economy. 

Thus the Reserve Bank of India has very clearly indicated by this policy that it is focused on increasing growth. 

READ THE MONETRY POLICY HERE 

(DISCLAIMER : This blog is for information purposes only)