Monetary Policy Statement, 2020-21: Resolution of the Monetary Policy Committee (MPC) May 20 to 22, 2020

 

Circular No. ES/149/2020-21                                                      23rd May, 2020   

         

To : Members of the Council

 

Sub: Monetary Policy Statement, 2020-21: Resolution of the Monetary Policy Committee (MPC) May 20 to 22, 2020

 

Dear Member, 

 

We would like to inform you that the Reserve Bank of India (RBI) has issued a Press Release dated 22nd May, 2020 on the above subject.

 

On the basis of an assessment of the current and evolving macroeconomic situation, the Monetary Policy Committee (MPC) at its meeting today (May 22, 2020) decided to: 

  • reduce the policy repo rate under the liquidity adjustment facility (LAF) by 40 bps to 4.0 percent from 4.40 percent with immediate effect;
  • accordingly, the marginal standing facility (MSF) rate and the Bank Rate stand reduced to 4.25 percent from 4.65 percent; and
  • the reverse repo rate under the LAF stands reduced to 3.35 percent from 3.75 percent.
  • The MPC also decided to continue with the accommodative stance as long as it is necessary to revive growth and mitigate the impact of COVID-19 on the economy, while ensuring that inflation remains within the target.

These decisions are in consonance with the objective of achieving the medium-term target for consumer price index (CPI) inflation of 4 percent within a band of +/- 2 percent, while supporting growth.

 

The main considerations underlying the decision are set out in the statement below.

 

I Assessment

a)Global Economy

b)Domestic Economy 

II Outlook

III Regulatory and Developmental Measures

 

The measures being announced today can be broadly delineated under four categories:

(A) Measures to Improve the Functioning of Markets

a) Refinancing Facility for Small Industries Development Bank of India (SIDBI)

b) Investments by Foreign Portfolio Investors (FPIs) under the Voluntary Retention Route (VRR)   

(B) Measures to Support Exports and Imports

a) Export Credit

b) Liquidity Facility for Exim Bank of India

c ) Extension of Time for Payment for Imports

 

(C ) Measures to Ease Financial Stress

 

 

(D) Measures to ease financial constraints faced by State Governments

a) Measures to ease financial constraints faced by State Governments

 

Members may please make a note of the above.

 

Thanking you,

 

Yours faithfully,

 

S.BALARAJU

EXECUTIVE DIRECTOR

 

 

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