RBI Monetary Policy 6 Aug 2020 Highlights
The Reserve Bank of India (RBI)’s Monetary Policy Committee (MPC) is set to announce its decision on interest rates. Reserve Bank of India hits pause button, keeps interest rates unchanged at bimonthly monetary policy review
Repo rate remains unchanged at 4%
Reverse repo rate also remains unchanged at 3.3%
Real GDP growth to remain in negative zone in 1st half and in full fiscal,
Exports contracted for 4th successive month, though pace of contraction fell. Supply chain disruptions persist with implications on prices of food & non-food items
Taking into consideration all factors, the GDP growth in the first half of the year is estimated to remain in the contraction zone. For the year 2020-21 as a whole, real GDP growth is also estimated to be negative
Marginal Standing Facility Rate and bank rate unchanged at 4.25%
Space for further monetary action is available but advisable to be judicious. 250 bps rate cut is working through the system
RBI is perhaps the only central bank in the world which has set up a special quarantine facility for continuity of critical operations
Inflation stays high, says RBI governor Domestic food inflation has remain elevated across economies ever since the Coronavirus outbreak, says RBI governor Shaktikanta Das. But he said that agriculture sector prospects have improved with the good monsoons and rise in Kharif sowing area
The merchandise exports contracted for fourth consecutive month though the pace of contraction has moderated,
MPC is expected inflation to stay elevated in Q2FY21 but is of the view that is it likely to ease in H2 aided by favourable base effects
Abundant liquidity has also supported other segments like mutual funds, says RBI governor Shaktikanta Das. He added transmission of rate cut has been better.
RBI Governor applauds the contribution of employees of banks and financial institutions for ensuring uninterrupted operations during the trying times of COVID19, also extends gratitude to all CoronaWarriors
Global economic activity has remained fragile during the first half of 2020
Renewed surge in COVID19 infection in major economies in July has subdued early signs of revival which had appeared in May and June
Global financial markets have however been buoyant
Monetary Policy Committee has noted that in India too, economic activity had started to recover, but surges of fresh infections have forced fresh lockdowns, hence several high frequency indicators have levelled off
Industrial production remained in contraction Manufacturing Purchase Managers’ Index shrank in July for 4th consecutive month
India’s foreign exchange reserves have increased by 56.8 billion US dollars during April – July 2020, to 534.6 billion US dollars as on July 31, 2020, equivalent to 13.4 months of imports
RBI’s To-Do List In Fight Against Covid-19
To enhance liquidity support for financial markets
To further ease financial steps caused by Covid-19
To improve the flow of credit To deepen digital payment systems
To augment customer safety in cheque payments
To facilitate innovations across the financial sector
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