As extensively anticipated, the Reserve Bank of India (RBI) after once again maintained the status quo in its February 2021 monetary policy overview on Friday, by sticking to an accommodative stance on the interest price front and reiterating its commitment to financial development.
Industry professionals stated in line with evolving macro atmosphere, the RBI policy maintained accommodative stance to assistance the nascent recovery but hinted at continued normalisation of liquidity. “This likely indicated a gradual inching up of yields in due course but without disrupting the ongoing economic recovery in any way. Investors with asset allocation approach and long-term investment horizon may like to continue to remain invested but should expect elevated volatility in days ahead,” stated Mahendra Jajoo, CIO-Fixed Income, Mirae Asset Management India.
Here we are taking a look at how the RBI policy announcement will influence borrowers, retail customers and investors:
Rates Remain Steady: Low interest prices are essential to financial revival. Inflation also wants to stay inside target. The RBI governor announced that for the 1st time considering that the start out of the pandemic, inflation has eased under 6%. This signifies that interest prices are probably to stay low, with the possibility of banks producing marginal revisions in either path as per their policies.
TLTRO On Tap For NBFCs: In October, banks had been permitted to take 3-year loans at the repo price in order to finance stressed sectors. The banks could use this liquidity to invest in corporate bonds, industrial papers, and non-convertible debentures in these sectors. “Now, the RBI has made the TLTRO On Tap facility available to NBFCs in order to ease the availability of credit in these sectors. This could have positive implications for the auto and real estate sectors since NBFCs heavily finance both these sectors and now more credit will be available for both retail customers intending to invest as well as for the manufacturers,” stated Adhil Shetty, CEO, BankBazaar.com.
Higher CRR: Last year, the RBI had relaxed CRR norms. Cash Reserve Ratio refers to the minimum percentage of its deposits that any industrial bank has to retain with the central bank. In light of the pandemic, the CRR was lowered by one hundred basis points to 3.00%. It will now be reversed to 4.00% in two phases by May 22.
Buy Government Bonds Directly From RBI: Retail investors will now be capable to get government securities straight from the RBI as opposed to obtaining them by means of institutions such as fund homes. This will let the government to borrow straight from the public who can earn an interest revenue on the bonds.
Integrated Ombudsman Scheme: The RBI has offered sturdy indications in current instances of its commitment to far better grievance redressal program. Currently, the alternate dispute resolution framework consists of 3 separate Ombudsman schemes for banks, NBFCs, and Digital Transactions.
“With this integration, retail consumers now have one centralised point for grievance redressal for a majority of grievances around retail banking. Having a common Ombudsman scheme means you now have one platform to convey complaints regarding deficiency of services associated with most products and services offered by the bank or NBFC. This will take away the confusion about whom to reach out to for grievance redressal in case of problems especially with any and all forms of digital transactions, from credit and debit cards to mobile and internet banking, and even wallet and UPI transactions,” Shetty stated.