As expected, the RBI maintained a status-quo on key policy rates, which we believe will continue well into late FY22. With the fiscal policy taking a leading role in reviving economic recovery in FY22, the central bank’s role remains crucial to complement the fiscal policy. Accordingly, the RBI maintained its accommodative policy stance and emphasized that the policy normalization process would be gradual while ensuring “ample liquidity in the system”. It extended the relaxation under the marginal standing facility by six months and announced a phased rollback of CRR from March ’21. To allay concerns regarding the government’s large gross borrowing needs in FY22, the RBI governor assured that the central bank would ensure the orderly completion of the market borrowing program. To support this, the RBI allowed retail investors’ participation in the G-sec market and extended the dispensation of enhanced held to maturity limit up to March 31, 2023. To boost credit growth for targeted sectors, it also widened the on-tap TLTRO scheme’s coverage to include NBFCs and announced steps to incentivize new credit flow to MSMEs borrowers.
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