Key highlights of RBI’s Statement on Development and Regulatory Policies

Press Release: 2021-2022/1694, Dated: 10.02.2022

The Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) has kept the repo rate unchanged at 4 per cent for the 10th consecutive time while maintaining an ‘accommodative stance’. The RBI also announced various other measures in a Statement on Development and Regulatory Policies.

The RBI in its Statement sets out various developmental and regulatory policy measures such as a) Extension of Term Liquidity Facility of ?50,000 crores to Emergency Health Services b) Extension of On-tap Liquidity Window for Contact-intensive Sectors, c) enhancement of limits under Voluntary Retention Route (VRR), d) Issue of guidelines for Credit Default Swaps (CDS) and measures are also taken relating to strengthening of payment and settlement system. The key highlights are detailed hereunder:

1. Liquidity Measures

1.1 Extension of Term Liquidity Facility of ?50,000 crores to Emergency Health Services

On May 5, 2021, an on-tap liquidity window of ?50,000 crore at the repo rate with tenors of up to three years was announced to boost provision of immediate liquidity for ramping up COVID-19 related healthcare infrastructure and services in the country.

With a view to boosting the provision of immediate liquidity for ramping up COVID-19 related healthcare infrastructure and services in the country.

Because of the positive response to the scheme, it is now proposed to extend this window up to June 30, 2022, from March 31, 2022, as announced earlier.

1.2 Extension of On-tap Liquidity Window for Contact-intensive Sectors

On June 4, 2021, it was decided to open a separate liquidity window of ?15,000 crores at the repo rate with tenors of up to three years available till March 31, 2022, for certain contact-intensive sectors.

Such banks were eligible to park their surplus liquidity up to the size of the COVID-19 loan book, created under this scheme with the RBI. Banks have deployed their funds to the tune of ?5,041 crores (up to February 4, 2022) to the entities under contact intensive sector. Given the response to the scheme, it is now proposed to extend this window up to June 30, 2022.

2. Financial Markets

2.1 Voluntary Retention Route (VRR) – Enhancement of Limits

To simplify stable investments in debt instruments issued in the country Voluntary Retention Route (VRR) for investment in government and corporate debt securities by Foreign Portfolio Investors (FPIs) was announced on 1st March, 2019. An investment limit of ?1,50,000 crore was set for investments under the VRR.

Given the encouraging response to the VRR, it is proposed to increase the investment limit under VRR by ?1,00,000 i.e. upto ?2,50,000 crore as compared to earlier limit of Rs. 1,50,000 crore with effect from April 1, 2022.

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