The Monetary Policy Committee (MPC) met on 2nd, 3rd and 4th, June 2021 and took stock of the evolving macroeconomic and financial conditions as well as the impact of the second wave of the pandemic. The Governor of the Reserve Bank of India, Shri Shaktikanta Das has announced that the Monetary Policy Committee voted unanimously to maintain status quo, keeping the Policy Repo Rate unchanged at 4% and that the Marginal Standing Facility and Bank Rate will remain at 4.25%. The Reverse Repo Rate too will remain unchanged at 3.35%. 

He informed that the Monetary Policy Committee was of the view that policy support from all sides is required to gain growth momentum and to nurture recovery after it takes root. “Hence policy rate has been left unchanged and an accommodative stance has been decided to be continued as long as necessary to revive and sustain growth, while ensuring inflation remains within target” the Governor said  while delivering RBI’s bi-monthly monetary policy statement through an online address.

Economy projected to grow at 9.5% in 2021-22

The Governor informed that according to RBI, Real GDP growth is projected to grow at 9.5% in 2021-22 consisting of 18.5 per cent in Q1; 7.9 percent  in Q2; 7.2 per cent in Q3; and 6.6 per cent in Q4 of 2021-22. Explaining the basis for this, he noted that unlike the first wave, impact on economic activity is expected to be relatively contained in the second wave, with restrictions on mobility being regionalized and nuanced.

While urban demand slowed in April and May 2021, the vaccination process is expected to gather steam in coming months and should help to normalize economic activity. The rebound in global trade is expected to support India’s export sector. He observed that rural demand is expected to remain strong, due to forecasts of a normal monsoon.

The Governor announced that the Consumer Price Index inflation is projected at 5.1% in 2021-22; 5.2 per cent in Q1; 5.4 percent  in Q2; 4.7 percent in Q3; and 5.3 percent in Q4 of 2021-22, with risks broadly balanced.

Additional Measures

The Governor also announced a set of additional measures with the objective of reviving the economy and to mitigate the adverse impact of the second wave of the COVID-19 pandemic.

  1. On-Tap Liquidity Window for Contact-Intensive sectors: In order to mitigate the adverse impact of the second wave of the pandemic on certain contact-intensive sectors, a separate liquidity window of ₹15,000 crores is being opened till March 31, 2022 with tenors of up to three years at the repo rate. Under the scheme, banks can provide fresh lending support to hotels and restaurants; tourism – travel agents, tour operators and adventure/heritage facilities; aviation ancillary services – ground handling and supply chain; and other services that include private bus operators, car repair services, rent-a-car service providers, event/conference organizers, spa clinics, and beauty parlours/saloons. By way of an incentive, banks will be permitted to park their surplus liquidity up to the size of the loan book created under this scheme with the Reserve Bank under the reverse repo window at a rate which is 25 bps lower than the repo rate or, termed in a different way, 40 bps higher than the reverse repo rate.
  2. Special Liquidity Facility to SIDBI:  To further support the funding requirements of micro, small and medium enterprises (MSMEs), particularly smaller MSMEs and other businesses including those in credit deficient and aspirational districts, it has been decided to extend a special liquidity facility of ₹16,000 crore to SIDBI for on-lending/ refinancing through novel models and structures. This facility will be available at the prevailing policy repo rate for a period of up to one year, which may be further extended depending on its usage.
  3. Expansion of coverage of borrowers under Stress Resolution Framework 2.0: The Resolution Framework 2.0 announced by the Reserve Bank on May 5, 2021 provides for resolution of COVID-19 related stress of MSMEs as well as non-MSME small businesses, and loans to individuals for business purposes. With a view to enabling a larger set of borrowers to avail of the benefits under Resolution Framework 2.0, it has been decided to expand the coverage of borrowers under the scheme by enhancing the maximum aggregate exposure threshold from ₹25 crore to ₹50 crore for MSMEs, non-MSME small businesses and loans to individuals for business purposes.
  4. Permission given to Authorized Dealer banks to place margins on behalf of FPI With a view to easing operational constraints faced by FPIs and promoting ease of doing business, it has been decided to permit Authorized Dealer banks to place margins on behalf of their FPI clients for their transactions in Government securities (including State Development Loans and Treasury Bills), within the credit risk management framework of banks.
  5. Regional Rural Banks can now issue Certificates of Deposit (CDs): Further, all issuers of CDs will be permitted to buy back their CDs before maturity, subject to certain conditions. This will facilitate greater flexibility in liquidity management.
  6. National Automated Clearing House (NACH) to be available on all days of the week NACH, a bulk payment system operated by the NPCI, facilitates one-to-many credit transfers such as payment of dividend, interest, salary, pension, etc., as also collection of payments pertaining to electricity, gas, telephone, water, periodic instalments towards loans, investments in mutual funds, insurance premium, etc. NACH has emerged as a popular and prominent mode of direct benefit transfer (DBT) to a large number of beneficiaries. This has helped transfer of government subsidies during the present COVID-19 in a timely and transparent manner. In order to further enhance customer convenience, and to leverage the 24×7 availability of RTGS, NACH which is currently available on bank working days, is proposed to be made available on all days of the week effective from August 1, 2021. The relevant instructions /circulars for all these measures will be issued separately.

The Governor also took note of the following observations made by the Monetary Policy Committee:

Rural demand is expected to remain strong thanks to the forecast of normal monsoon. Increased spread of COVID-19 infection in rural areas is a downside risk. Inflation print in April at 4.3% has brought some relief and policy elbow room.

RBI has conducted regular Open Market Operations and injected additional liquidity to the tune of Rs. 36,545 Crore till May 31, in addition to Rs. 60,000 Crore under Government Securities Acquisition Programme (G-SAP) 1.0, during the current year.  Of this, ₹10,000 crore would constitute purchase of state development loans (SDLs). It has also been decided to undertake G-SAP 2.0 in Q2:2021-22 and conduct secondary market purchase operations of ₹1.20 lakh crore to support the market. The specific dates and securities under G-SAP 2.0 operations will be indicated separately.

In his closing statement, the RBI Governor said that growth impulses are still alive and the RBI’s measures announced today are expected to reclaim the growth trajectory. “India’s position as Vaccine capital of the world with leadership in production of pharma products can change the COVID-19 narrative,” he pointed out.


The RBI Governor’s statement can be read here.

The Monetary Policy statement can be read here.