Mumbai: In line with the Union Budget, the Reserve Bank of India on Friday projected a GDP growth rate of 10.5 per cent for the financial year beginning April 1, on the back of a recovery in economic activities.
With regard to inflation, RBI Governor Shaktikanta Das said vegetable prices are expected to remain soft in the near term as the central bank projected retail inflation rate to come down to 5.2 per cent in the current quarter and progressively decline to 4.3 per cent by the third quarter of the next fiscal.
He said the growth outlook has improved significantly and the vaccination drive will help the economic rebound.
Das further said the economy will rebound to 10.5 per cent in the next financial year.
After the Budget 2021-22 announcement on Monday, Economic Affairs Secretary Tarun Bajaj had said that real GDP growth would be 10-10.5 per cent in the next fiscal.
"Our revenue figure is under-stated not overstated. We have taken nominal GDP at 14.4 per cent and revenue growth at 16.7 per cent. So, the buoyancy is only 1.16. We are hopeful we will get more than this. We will definitely be within 6.8 per cent and could be lower also," Bajaj had said.
The RBI Governor further said that the government will be reviewing the inflation target by March end.
The Monetary Policy Committee headed by the RBI Governor has been given the mandate to maintain annual inflation at 4 per cent until March 31, 2021, with an upper tolerance of 6 per cent and a lower tolerance of 2 per cent.
RBI lowers inflation projection to 5.20% for Q4 FY21
The Reserve Bank has lowered the retail inflation projection for the current quarter of this fiscal at 5.2 per cent, saying it has returned within the "tolerance band".
On the economy, the central bank said it is only going to look upwards from here.
Das also said the retail inflation has "returned within the tolerance band" of 4 per cent.
The Reserve Bank has the mandate to keep retail inflation at 4 per cent with a bias of plus/minus 2 per cent on either side.
The inflation (retail) projection is revised to 5.2 per cent for Q4 of the current fiscal, Das said, adding vegetable prices are likely to remain soft in near term on the back of fresh arrivals in the market.
In its previous policy decision in December, the RBI had projected retail inflation to be at 5.8 per cent for Q4 FY'21.
For the first half of the next fiscal year, the Reserve Bank has projected inflation to be in a band of 5.2-5 per cent.
And for the third quarter of 2021-22 (October-December), Das said: "We are projecting it (inflation) at 4.3 per cent. We are assessing the risks to be balanced".
NBFCs to get funds under on tap TLTRO scheme for incremental lending
RBI proposed to provide funds to non-banking finance companies (NBFCs) from banks under on tap TLTRO scheme for lending to some stressed sectors.
In October last year, the RBI had announced on tap targeted long term repo operations (TLTRO) scheme for banks. It had said to conduct on tap TLTRO with tenors of up to three years for a total amount of up to Rs one lakh crore at a floating rate linked to the policy repo rate. The scheme is available till March 31, 2021.
"NBFCs are well recognised conduits in reaching out to the last mile in various sectors, it is now proposed to provide funds from banks under the TLTRO on Tap scheme to NBFCs for incremental lending to the specified stressed sectors,” RBI Governor Shaktikanta Das said during the monetary policy announcement.
Banks can deduct loans to new MSME borrowers from NDTL for CRR purpose: RBI
RBI allowed banks to deduct loans disbursed to new micro, small, and medium enterprise (MSME) borrowers from their net demand and time liabilities (NDTL) for calculation of the cash reserve ratio (CRR).
“In order to incentivise new credit flow to MSME borrowers, scheduled commercial banks will be allowed to deduct credit disbursed to 'New MSME borrowers' from their net demand and time liabilities (NDTL) for calculation of the cash reserve ratio (CRR),” RBI said in its 'Statement on Developmental and Regulatory Policies', announced earlier in the day.
The central bank said for this exemption, 'new MSME borrowers' are defined as those MSME borrowers who have not availed any credit facilities from the banking system as on January 1, 2021.
It said the exemption will be available only for exposures up to Rs 25 lakh per borrower for credit extended up to the fortnight ending October 1, 2021, for a period of one year from the date of origination of the loan or the tenure of the loan, whichever is earlier.
RBI to look at harmonising regulations for microfinance lenders
Against the backdrop of the Assam Assembly passing a law to regulate microfinance institutions in the state, RBI said it will look to "harmonise regulatory frameworks" for such microlenders.
Microfinance lenders have witnessed a dip in loan collections after the passage of the Assam Microfinance Institutions (Regulation of Moneylending) Bill, 2020, in the poll-bound north eastern state in December.
Concerns have been raised about the law, which seeks to "protect and relieve" economically vulnerable groups from usurious interest rates and coercive recovery means, impacting credit culture.
"In view of the evolving role of the sector, and the need for a robust framework for enhanced delivery of last mile credit and strengthening consumer protection, the RBI will come out with a consultative document harmonising regulatory frameworks applicable to various regulated lenders in the microfinance space," RBI Governor Shaktikanta Das said.
Das also noted that the MFI sector plays an important role in the last mile delivery of credit to the needy segments.
It can be noted that regulation of the MFI sector has always been a controversial topic. In 2010, Andhra Pradesh had come out with some laws which impacted MFIs, resulting in an intervention by the RBI with initiatives, including creation of a separate category of lenders (NBFC-MFIs) and also caps on interest rates.
The MFIs have strong networks going deep into a geography which work on intimate understanding of the borrowers while extending the unsecured loans. The risk taken and the costs of extending the credit result in high interest rates.
Das also announced an expert committee on primary Urban Cooperative Banks (UCBs), which will provide a medium term roadmap for strengthening the sector, leveraging on the legislative amendments.
"The recent amendments to the Banking Regulation Act, 1949 have brought near-parity in regulatory and supervisory powers between UCBs and commercial banks, including those related to governance, audit and resolution," Das said.
Constitution of the committee and its terms of reference will be announced shortly, he added.
In the aftermath of the Punjab Maharashtra Cooperative (PMC) Bank crisis, the government had amended the Banking Regulation Act, giving the RBI full control to regulate the UCBs.
RBI extends deadline for meeting last tranche of capital conservation buffer by 6 months
RBI extended the deadline for meeting the last tranche of capital conservation buffer (CCB) by another six months till October this year due to continuing stress on account of COVID-19 pandemic.
As part of the regulatory measures taken in the wake of COVID-19, the implementation of the last tranche of the CCB of 0.625 per cent, which was scheduled to take effect from April 1, 2020, was deferred till April 1, 2021.
"Considering the continuing stress on account of COVID-19, and in order to aid in the recovery process, it has been decided to defer the implementation of the last tranche of the CCB of 0.625 per cent from April 1, 2021 to October 1, 2021," RBI Governor Shaktikanta Das said.
The capital conservation buffer ensures that banks have an additional layer of usable capital that can be drawn down when losses are incurred.
As per Basel standards, the CCB was to be implemented in tranches of 0.625 per cent and the transition to full CCB of 2.5 per cent was set to be completed by March 31, 2019. It was introduced after the 2008 global financial crisis to improve the ability of banks to withstand adverse economic conditions.
It was one of the sore points between RBI and the government during 2018. Following the change of guard at the central bank, it was decided to defer it by a year till March 2020.
Besides, it was also decided to defer the implementation of Net Stable Funding Ratio (NSFR).
The NSFR, which reduces funding risk by requiring banks to fund their activities with sufficiently stable sources of funding over a time horizon of a year in order to mitigate the risk of future funding stress, was required to be introduced by banks from April 1, 2021.
"While banks are comfortably placed on the liquidity front, in view of the continued stress on account of COVID-19, it has been decided to defer the implementation of NSFR to October 1, 2021," he said.
The Reserve Bank on September 1, 2020, increased the limits under Held to Maturity (HTM) category from 19.5 per cent to 22 per cent of net demand and time liabilities (NDTL) in respect of statutory liquidity ratio (SLR) eligible securities acquired on or after September 1, 2020, up to March 31, 2021.
"This dispensation was made available up to March 31, 2022. In order to provide certainty to the market participants in the context of the borrowing programme of the centre and states for 2021-22, it has now been decided to extend the dispensation of enhanced HTM of 22 per cent up to March 31, 2023 to include securities acquired between April 1, 2021 and March 31, 2022," he said.
The HTM limits would be restored from 22 per cent to 19.5 per cent in a phased manner starting from the quarter ending June 30, 2023.
It is expected that banks will be able to plan their investments in SLR securities in an optimal manner with a clear glide path for restoration of HTM limits, he added.
One nation one ombudsman: RBI to integrate consumer grievance redressal scheme
RBI announced it will be integrating consumer grievances redressal under a single ombudsman as against three schemes working at present.
There are dedicated ombudsman schemes devoted to consumer grievance redressal in banking, non-bank finance companies and digital transactions, respectively, at present.
"To make the alternate dispute redress mechanism simpler and more responsive to the customers of regulated entities, it has been decided to implement, inter alia, integration of the three Ombudsman schemes and adoption of the 'One Nation One Ombudsman' approach for grievance redressal," Governor Shaktikanta Das said.
The move is intended to make the process of redress of grievances easier by enabling the customers of the banks, NBFCs and non-bank issuers of prepaid payment instruments to register their complaints under the integrated scheme, with one centralised reference point, he said.
The RBI is targeting to roll out the e-Integrated Ombudsman Scheme in June 2021, he said.
Das said financial consumer protection has gained significant policy priority across jurisdictions and the RBI has been taking a slew of initiatives on the same.
“In line with the global initiatives on consumer protection, RBI has taken various initiatives to strengthen Grievance Redress Mechanism of regulated entities,” he said.
The RBI had operationalised complaint management system (CMS) portal as one stop solution for alternate dispute resolution of customer complaints not resolved satisfactorily by the regulated entities.
Read more: RBI keeps policy rate unchanged fourth time in a row
(PTI)
