RBI’s Monetary Policy Review

RBI’s Monetary Policy Review

BE/RBINOTE/25/2020

Monetary Policy

While announcing a cut in the REPO Rate by 40 basis points to 4%, the MPC meeting also came out with the following points aimed at the country’s Economic Growth:

  • though the lockdown may be lifted by end-May with some restrictions, economic activity even in Q2 may remain subdued due to social distancing measures and the temporary shortage of labour.
  • Recovery in economic activity is expected to begin in Q3 and gain momentum in Q4 as supply lines are gradually restored to normalcy and demand gradually revives.
  • The inflation outlook is highly uncertain. As supply lines get restored in the coming months with gradual relaxations in the lockdown, the unusual spike in food inflation in April is expected to moderate.
  • Further, the forecast of a normal monsoon also portends well for food inflation”.
  • Group exposure limit for lenders to corporates raised to 30% from 25%
  • Export credit period increased to 15 months from 1 year.
  • RBI will extend ₹15,000 crore line of credit to EXIM Bank
  • Loan moratorium extended by another 3 months till August 31.

Note:

  • Government 10-year bond yields slumped 15 basis points after the repo rate cut.
  • India’s foreign exchange reserves have increased by 9.2 billion during 2020-21 from 1st April onwards. So far, up to 15th May, foreign exchange reserves stand at 487 billion USD.
  • GDP growth expected to remain in negative category
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Author: Admin Bankedge

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