RBI Press Conference Live Updates: RBI Very Much An Inflation Targeting Central Bank, Says Das
Rate Decision & Stance
India's Monetary Policy Committee kept the benchmark repo rate unchanged at 4%.
The reverse repo rate remains unchanged at 3.35%
The MPC voted 5-1 to retain the accommodative stance as long as necessary to revive and sustain growth on a durable basis, while ensuring that inflation remains within the target.
RBI Very Much An Inflation-Targeting Central Bank
Addressing concerns that the RBI is de-emphasising its inflation targeting role, Governor Das said that is not the case. The RBI is very much an inflation-targeting central bank.
RBI Providing Clear Roadmap On Liquidity
In response to a question on whether the RBI has surprised the market with the higher quantum of variable rate reverse repo auctions, Das said the central bank is providing a clear roadmap. It is only by December that the size of the size of these auctions will move up to Rs 6 lakh crore.
Replying to BloombergQuint's query on what signals will give RBI comfort to remove emergency accommodation via the large surplus liquidity and the low reverse repo rate, RBI deputy governor Michael Patra said the central bank is looking at signs of a more durable recovery. It is also looking to ensure that the inflation rate moving towards targets. "We are not looking at destination but journey," Patra said.
The sequencing, according to Patra, would follow a track along these lines: Stopping of liquidity addition, moving to variable rate reverse repo auctions, followed by next steps.
RBI Press Conference
Speaking at a press conference after the policy review, RBI Governor Das countered concerns around asset price inflation due to the liquidity overhang. He said that the RBI has taken all domestic factors into consideration in deciding its stance and liquidity approach.
He reiterated that domestic factors will be dominant in policy decisions as opposed to moves by global central banks.
Governor Das, as always, peppered his comments with quotable quotes.
In explaining the central bank's liquidity stance, Das said: "We don't want to rock the boat when the shore is near as there is a journey beyond the shores."
He closed his speech by quoting Mahatma Gandhi to say: "To lose patience is to lose the battle."
Signal that the central bank will stay accommodative and patient in its unwinding?
Clear, Graduated Roadmap On Liquidity
In response to a question on the "surprise factor" in RBI's VRRR auctions, Das said that there is no surprise. The size of the VRRR auctions is only being raised gradually to Rs 6 lakh crore, Das said. This should give markets adequate time to adjust.
RBI Stops G-SAP Operations
The RBI has decided to stop bond purchases under G-SAP. The RBI governor said that given the liquidity overhang and the absence of fresh government borrowing for GST compensation means that these bond purchases are not necessary.
The RBI will, however, continue to conduct open market operations as needed.
The RBI has also stepped up the pace of variable rate reverse repo auctions. It may also consider complementing the 14-day VRRR auctions with 28-day VRRR auctions.
A calendar for fortnightly VRRRs has been announced.
Rs 4 lakh crore on Oct. 8
Rs 4.5 lakh crore on Oct. 24
Rs 5 lakh crore on Nov. 3
Rs 5.5 lakh crore on Nov. 18
Rs 6 lakh crore on Dec. 3
RBI has maintained ample surplus liquidity, said Governor Das. Level of surplus increased further in September, with absorption averaging Rs 9 lakh crore per day.
Potential liquidity overhang amounts to more than Rs 13 lakh crore. As the economy recovers, a near consensus view is that liquidity measures would need to evolve in sync with macroeconomic developments. "This process has to be gradual and non-disruptive," Das said.