RBI leaves key rates unchanged amid high inflation

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Taking stock of the recent surge in consumer inflation, the Reserve Bank of India on Thursday left the repo rate and other key policy rates unchanged at existing levels.

Governor Shatikanta Das said hoped that it was intended to contain the prices within its medium-term target. He said the RBI's Monetary Policy Committee unanimously decided to keep the key rates unchanged and maintain an "accommodative" stance for "as long as necessary to revive growth and mitigate the impact of COVID-19, while ensuring that inflation remains within the target going forward".

The inflation had surged past 6 per cent mark in the recent times. Das said the central bank would remain "watchful for a durable reduction in inflation to use the available space to support the revival of the economy." The six-member MPC saw upside risks to food prices and elevated headline inflation during July-September, which would ease in the second half of the 2020-21 fiscal.

The central bank also allowed lenders to restructure corporate and MSME loans as well as raised the limit of loans that can be availed against gold ornaments and jewellery. Currently, up to 75 per cent of the value of gold ornaments and jewellery can be availed as loan for non-agriculture purposes.

"With a view to mitigating the impact of COVID-19 on households, it has been decided to increase the permissible loan-to-value ratio (LTV) for such loans to 90 per cent. This relaxation shall be available till March 31, 2021," he said.

"With a view to align the guidelines with emerging national priorities and bring sharper focus on inclusive development, the guidelines have been reviewed after wide ranging consultations with all stakeholders," the RBI said.

The RBI also decided to broaden the scope of Priority Sector Lending (PSL) by including start-ups and enhancing borrowing limits for renewable energy sectors.  The central bank would also increase the targets for lending to 'small and marginal farmers' and 'weaker sections' under the PSL.

To address the regional disparities in the flow of priority sector credit, an incentive framework has also been put in place for banks.

The eligible entities get access to credit on easier terms from banks under the PSL. Banks are required to assign 40 per cent of Adjusted Net Bank Credit or Credit Equivalent Amount of Off-Balance Sheet Exposure, whichever is higher to priority sector, including agriculture and micro-enterprises, it said.

The PSL guidelines were last reviewed by the central bank in April 2015 (with inputs from PTI)

Image Credit: Kerala Kaumudi

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