RBI keeps benchmark interest rate unchanged at 5.15%; other key highlights of monetary policy review

The Reserve Bank of India, for the second straight time, on Thursday kept its key policy rate unchanged at 5.15 percent, maintaining its accommodative policy stance as long as it was necessary to revive growth. The central bank retained GDP growth at 5 percent for 2019-20 and pegged it at 6 percent for the next fiscal. “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. [caption id=“attachment_3197810” align=“alignleft” width=“380”] Representational image. Reuters.[/caption] The six-member committee voted unanimously to hold rates, but also said that there is “policy space available for further action”. Between February and October 2019, the RBI had reduced repo rate by 135 basis points. Following are the highlights of RBI’s sixth bi-monthly monetary policy statement, 2019-20:

• Policy rate kept unchanged at 5.15 percent
• GDP growth for 2020-21 fiscal pegged at 6 percent
• Upward bias expected in overall food prices on account of vegetables, pulses
• Accommodative stance to revive growth maintained; inflation to remain elevated in short-run
• Retail inflation projection revised upwards to 6.5 percent for January-March quarter
• Breakout of Coronavirus may impact tourist arrivals, global trade
• Rationalisation of personal income tax rates in the 2020-21 Budget to support domestic demand
• Need for adjustment in interest rates on small saving schemes outlined
• Pricing of loans by banks for the medium enterprises to be linked to an external benchmark effective 1 April
• Time for restructuring of GST-registered MSME loans extended till December 2020, from March 2020 at present
• Revised regulations for housing finance companies to be issued
• RBI to periodically publish a composite ‘Digital Payments Index’ (DPI) from July 2020 to capture the extent of digitisation of payments
• Framework for a Self-Regulatory Organisation (SRO) for digital payments to be issued
• Pan India Cheque Truncation System (CTS) to be made operational by September
• Extension of date of commencement of commercial operations of project loans for commercial real estate, delayed for reasons beyond the control of promoters, by one year, allowed
• Crude prices likely to remain volatile
• Foreign exchange reserves stood at $471.4 billion on 4 February, 2020
• Net FDI rose to $24.4 billion in April-November 2019, against $21.2 billion a year ago
• Net foreign portfolio investment (FPI) stood at $8.6 billion in 2010-20 (till 4 February) as against net outflows of $14.2 billion in the year ago period
• All six members of Monetary Policy Committee vote in favour of maintaining status quo on interest rate
• Next meeting of the MPC scheduled during 31 March, 1 and 3 April, 2020.

(With PTI inputs)