Credit policy day!
Gov begins the speech
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MPC voted for unchanged repo rate at 4%

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Voted for accommodative stance
Bank rate unchanged
Rev repo unchanged

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Indian economy: signs of growth visible
Deep contractions are behind us
Silver linings are there
Poised to bounce back, unless there is a second wave

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Agri has been buoyant
Migrant labour is returning
Construction coming back to life
Rising levels of energy consumption
traffic is up
online commerce is up
mood of nation, from fear to hope

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Inflation projection: inflation will ease closer to the target
Q2: still contraction, but better than Q1
Overall business expectation is better
PMI for Sept 2020 - rose
Services PMI for Sept - still in contraction, but better

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GDP - may break out of contraction by Q4
3 speed recovery in India, no letter like V, W or even K!
(Small jokes make it less arid)
Sectors to do good: agri, FMCG, 2 whalers, vehicles, drugs, electricity

MFG firms to recover by Q3
Put investment and exports likely to be subdued
GDP growth FY21: decline by 9.5%, risks tilted to downside

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RBI will maintain comfortable liquidity.

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Yields in G Sec need to reflect the easy liquidity
Evolution of yield curve is a public good!

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Again a statement to say: RBI will do what it takes to keep the markets liquid and functioning

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Inflation moved up beyond the tolerance band of the target. Will ease over Q3 and 4
Supply disruptions and margin mark ups are the reason for this inflation. These should ease
MPC has looked at current inflation hump as temporary

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Additional measures
1. Liquidity
On tap TLTRO
tenors of upto 3 years - Rs 1 trillion worth at a floating rate linked to repo rate
Till 31 March 2021
Money taken by banks to be deployed in corp bonds and CP
Also for bank loans to these sectors
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1b. SLR holdings. HTM category
RBI hiked from 19.5% to 22%
Extend 22% upto March 31 2022

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1c. OMO in SDLs as special case during this FY.
For states to borrow more easily

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2. Export support
Some relaxation on caution listing

3. Financial markets
Risk weights on housing loans
Link them to loan to value ratio

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4. Priority sector
Co-lending model to leverage lending capacities

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5. Payments
24/7x365 RTGS from Dec 2020
(India is one of the few countries to do this)

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PSOs - perpetual authorisation rather than 5 year licences

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Market seems to like the speech!
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Monetary Policy Report
https://rbidocs.rbi.org.in/rdocs/Publications/PDFs/MPR0910200CB2848C2D8A40758A1FB7AE110E3F16.PDF

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Always a pleasure to watch @ananthng unpack a credit policy!
He said that the @RBI governor is saying:
1. We shall overcome
2. Mein Hu Na!

Good to see the new MPC take a pragmatic view on inflation and is putting growth concerns over inflation that @RBI sees as a temporary hump due to supply side issues.
RBI is saying: Go for growth!
markets saying: Yay!

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As we watch the @RBI battle covid and on the expectation of a fiscal stimulus from MoF, the market seems unstoppable. To all those who actually went in and bought in the March 2020 crash: well done!

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The @RBI Gov statement
https://rbidocs.rbi.org.in/rdocs/Content/PDFs/GS0910209995CC4A0ED348CDAE7DF1D5921F0AA9.PDF

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