• Today, in the sixth bi-monthly monetary policy statement for 2019-20, the Reserve Bank of India announced that the repo rate is 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 proceed with the accommodative attitude as long till a stage is reached for revival of growth, while ensuring that inflation remains within the target.


    • With a view to provide a to give a boost to digital banking and also enable the 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.
  • The Governor also added that monetary transmission across various money market segments and the private corporate bond market has been sizable.
  • 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.
  • The Monetary Policy Committee (MPC) felt that  the 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.
  • Further, 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.

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