Download DMI Finance App! Click here

Close

RBI reiterates dovish policy stance; announces bond-purchase programme to manage yield

  • 7 Apr 2021
  • Post Views: 3704

The RBI maintained a status quo on policy rates and reiterated an accommodative policy stance in its policy meeting today. However, the RBI changed its forward guidance from a time-based to state-based guidance, apprising the uncertainty related to the ongoing second COVID wave. The RBI stuck to its dovish leaning, prioritizing growth revival as it committed to keeping system liquidity in “surplus”, despite an upward revision to its inflation forecasts. Towards this accord, several measures were announced, including the extension of the on-tap TLTRO scheme, liquidity support to the All-India Finance Institutions (AIFI), and extension of Priority Sector Lending classification for lending by banks to NBFCs for ‘on-lending”. To enable an orderly evolution of the yield curve – the RBI announced an upfront bond-buying G-sec acquisition programme” or G-SAP 1.0 of Rs 1 lakh crore in Q1 FY22. This, coupled with RBI’s decision to conduct a variable rate reverse repo of longer-tenure, should narrow the term-premium and flatten the yield curve.

Disclaimer:This research report material the Report is for the personal information of the authorised recipient s and is not for public distribution and should not be reproduced or redistributed to any other person or in any form without DMI s prior permission p p In the preparation of this Report Read more the preparation of this Report, DMI has used information that is publicly available as well as data gathered from third party sources. Information gathered and material used in this Report is believed to have been obtained from reliable sources. DMI, however makes no warranty, representation or undertaking, whether expressed or implied, that such information is accurate, complete or up to date or current as of the date of reading of the Report, nor does it assume any legal liability, whether direct or indirect or responsibility for the accuracy, completeness, currency or usefulness of any information in this Report. Additionally, no third party will assume any direct or indirect liability. It is the responsibility of the user or recipient of this Report to make its/his/her own decisions or enquiries about the accuracy, currency, reliability and correctness of information found in this Report.

Any statement expressed as recommendation in this Report is general in nature and should be construed strictly as current opinion of DMI as of the date of the Report and may be subject to change from time to time without prior intimation or notice. The readers of this Report should carefully read, understand and investigate or enquire (either with or without professional advisors) into the risks arising out of or attached to taking any decisions based on the information or opinions contained in this Report. DMI or its officers, directors, personnel and employees, including persons involved in the preparation or issuance of this Report may have potential conflict of interest with respect to any recommendation and related information and opinions.

Neither DMI nor any of its officers, directors, personnel and employees shall be liable for any loss, claim, damage of whatsoever any nature, including but not limited to, direct, indirect, punitive, special, exemplary, consequential, as also any loss of profit in any way arising from the use of this Report or the information therein or reliance of opinions contained in this Report, in any manner.

No part of this Report may be duplicated or copied in whole or in part in any form and or redistributed without the prior written consent of DMI. Any reproduction, adaptation, distribution or dissemination of the information available in this Report for commercial purpose or use is strictly prohibited unless prior written authorisation is obtained from DMI. The Report has been prepared in India and the Report shall be subject only to Indian laws. Any foreign reader(s) or foreign recipient(s) of this Report are requested to kindly take note of this fact. Any disputes relating to the Report shall be subject to jurisdiction of Republic of India only.

Read less