The RBI did what everyone of knew it would do – maintain a status quo. Not just interest rates but also the GDP target for FY22 at 9.5% - all were kept where they were. The RBI Governor said that it would all to boost the “nascent and hesitant recovery” seen in the economy.

The statement was less dovish with emphasis more on sustained revived growth but in no way does it indicate that we are back to normal times – the message we get is that RBI remains vigilant though it has begun the process of moving towards normalization.

Though the inflation at 6.26% in June was much over MPC’s target of 4(+/-2)% for the second consecutive month, RBI remained focused on growth as it feels that inflation will soon start easing.

The MPC voted 5:1 for maintaining the ‘accommodative’ stance while all voted for the status quo.

To summarise - RBI has kept the doors open in case it needs to step up if the third wave wrecks havoc while it begins the process of normalisation. But we dont see the RBI reversing the rate cycle any time soon.

Highlights of the RBI Monetary policy:

*Repo rate remains at 4%; reverse repo at 3.35%

*Maintained its forecast for 9.5% real GDP growth in FY22

*Raised its inflation projection for FY22 at 5.7% compared to 5.1% in the last policy.

*Inflation may remain close to upper tolerance band in Q2 but should ebb in Q3.

*To maintain liquidity – to step up variable reverse repo rate (VRRR) auctions.

*Size of the fortnightly VRRR auctions has been raised to Rs 2.5 lakh crore from Rs 2 lakh crore earlier.

*Deadline to meet a set of benchmarks that companies had to meet has been extended by six months.

*To mitigate impact of transition from LIBOR benchmark - export credit in foreign currency can be issued using any other widely accepted reference rate.

*RBI to provide guidance on restructuring of derivatives linked to LIBOR.

*On-Tap TLTRO scheme deadline has been extended by another three months till Dec.31, 2021.

*Marginal standing facility relaxation given to banks last year in March has also been extended till Dec, 31, 2021.