Major announcements from Shaktikanta’s speech on RBI Monetary Policy 2021

Eyes will today shift focus from North Block and Dalal Street to Mint Road as the Reserve Bank of India gears up to announce decisions taken by its Monetary Policy Committee. After three days of deliberation, RBI’s MPC will announce where interest rates are headed to from here. The move gains significance this time as earlier this week the central government unveiled its massive borrowing plan. The 10-year bond yield has gone up from 5.93% a day ahead of the Union Budget to 6.08% yesterday.

The Reserve Bank of India’s (RBI’s) six-member monetary policy committee, headed by Governor Shaktikanta Das, is scheduled to announce the outcome of its bi-monthly monetary policy review today. The RBI had last revised its policy rate on May 22, 2020, in an off-policy cycle to perk up demand by cutting interest rate to a historic low.


“2020 tested our endurance, while 2021 is setting the stage for a new economic era in our history,” said Shaktikanta, RBI Governor. Indian economy poised to move only in one direction that is in the upward direction said, Shaktikanta Das.

The key policies remain unchanged:

  1. Repo rate unchanged at 4%.
  2. Accommodative stance to continue for now.
  3. Reverse repo rate unchanged at 3.35%.
  4. MSF and bank rate unchanged at 4.25%.

Highlights of the RBI Monetary Policy Meet:

  • Reverse repo rate unchanged at 3.35%.
  • The RBI keeps policy repo rate unchanged at 4%, maintains an accommodative stance.
  • MSF and bank rate unchanged at 4.25%.
  • Stable near-term outlook on account of inflation being in control says, Shaktikanta Das. Given that inflation has come within the tolerance band, MPC decided to prioritise growth.
  • Real GDP growth projected at 10.5% in 2021-22.
  • The projection for CPI-based inflation revised to 5.2% for Q4 of FY21, for H1 of FY22 at 5% to 5.2%, and for Q3 of FY22 at 4.5%.
  • RBI will ensure the govt’s Rs 12-trillion market borrowing programme in a smooth manner.
  • The TLTRO on-tap scheme announced for banks earlier extended to NBFCs.
  • Access to funds for banks under MSF extended by six months beyond March-end, says RBI.
  • Banks to be incentivised for extending new MSME loans declared RBI.
  • RBI will form an expert panel to strengthen primary urban co-op banks.
  • RBI will restore CRR in 2 phases to 3.5% w.e.f March 27 and 4% w.e.f May 22, 2021.
  • Retail investors can open Gilt accounts with RBI, says Shaktikanta Das.
  • Rs 1.53 trillion provided to meet the liquidity requirements of banks.
  • Resident individuals can make remittance to IFSCs for NRIS, said RBI.
  • RBI extends deadline for meeting capital conservation buffer of 0.625 pc till October 2021.

Apart from these, RBI announced that consumer confidence is reviving and business expectations of manufacturing, services and infrastructure remain upbeat while 2021 has started on a positive note with vaccination drive providing an impetus. FDI and FPI flow into India have increased in recent months reflecting the faith reposed in India by the world and at the same time, the investment-oriented stimulus given under Atmanirbhar Bharat has begun to show results. The RBI has proactively taken steps to insulate domestic financial markets from global stress and unpredictability. Also, its stance of liquidity management continues to be accommodative and will remain so as long as necessary.

Moreover, the retail investors can now access primary and secondary government bond market. Also, RBI’s Retail Direct facility to allow retail investors access to G-secs, both in the primary and secondary markets, however, the roadmap to be announced later.

It will release various guidelines for the MFI sector. One nation, one ombudsman- to make ombudsman scheme more efficient, a central integrated ombudsman scheme to be rolled out for redress of grievances from June 2021. RBI shall also issue guidelines on outsourcing for digital payment system later this year.

“After the chaos and despair of the year gone by through which we have sailed together, we shall continue to sail ahead. There is a strong conviction that in FY22 we will undo the damage of COVID-19,” said Das. The year 2021 is setting up a new era in the course of our economic history, he added.