BE/RBINOTE/43/2020
The Monetary Policy Committee of RBI has started its three-day brainstorming meeting on the bi-monthly monetary policy in the midst of the urgency to revive the Covid19 hit Indian Economy since there is more demand for a loan restructuring by the industry concerned. The decision will be released by the committee on 6th August 2020 at the end of its 24th meeting.
There is an urgent requirement of the economy is to bring the economy back on track. MPC has overall cut the repo rate by 115 basis points over these two meetings held in March and May this year. Also, there is a different opinion from various sections on the rate cut by RBI. Some argue that one-time loan restructuring was more essential at this crucial stage in order to fight the impact of Covid-19.
- The Central bank has been actively involving itself in limiting the damage to the economy caused by the pandemic and lockdown
- SBI has cut interest rates on fresh loans by 72 basis points which was the fastest transmission every recorded.
- Also SBI has cut by an equivalent 115 basis points on its repo linked retail loan portfolio.
- Government has tasked RBI to keep inflation at 4% (+ or – 2%).
- Central Bank mainly factors in CPI while formulating the monetary policy.
- Latest data reveals, higher prices of food items more so that of meat, fish, cereals, and pulses has pushed the retail inflation based on Consumer Price Index (CPI) to 6.09% in June this year. The inflation rate for July will be announced on August 12.
- Also some experts feel that MPC would maintain accommodative stance on its policy due to the fast-changing macroeconomic
- Further the monetary policy was in an accommodative mode before outbreak of Covid-19 with a cumulative repo rate cut of 135 basis points between Feb 2019 and the beginning period of the Pandemic.
Let us wait and see.
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