RBI’s 6th Bi-Monthly Monetary Policy - 2019-20

Repo Rate – remains unchanged at 5.15%

Reverse Repo Rate – remains unchanged at 4.90%

Bank Rate & Marginal Standing Facility (MSF) Rate – remains unchanged at 5.4%

Cash Reserve Ratio – The CRR of scheduled banks remains unchanged at 4.0% of their Net Demand and Time Liabilities (NDTL)

The Monetary Policy Committee voted unanimously to keep the policy rate unchanged. It also decided to continue with the accommodative stance as long as it is necessary to revive growth while ensuring that inflation remains within the target. It was enumerated that policy space exists for future action and the same may be addressed through opportune instruments gauging the growth-inflation dynamics. The GDP growth is projected at 6.0% for FY21 in the range of 5.5-6.0% in H1 and 6.2% in Q3. The CPI estimates were revised upwards to 6.5% for Q4:2019, 5.4 5.0% for H1 FY21 and 3.2% for Q3 FY21 with risks broadly balanced. Crude prices are likely to remain volatile due to unabating geopolitical tensions in the Middle East and the uncertain global economic outlook. The Core-CPI is likely to reflect cost-push pressures on account of higher telecom charges, drugs & pharmaceuticals, rising input costs for services, etc. Financial markets may continue to be influenced by domestic and global dynamics imparting the domestic inflation outlook.

In the post-policy press conference, the Governor gave an explicit hint of further easing. However, we continue to believe that we are near the end of the rate easing cycle unless global growth falters due to coronavirus.