RBI's monetary policy announcement: What is expected?
RBI's monetary policy announcement: What is expected?

In August 2019, the Reserve Bank of India (RBI) had permitted banks to classify lending to registered non-banking finance companies (NBFCs) as Priority Sector lending (PSL). Now, the banking regulator has decided to extend it by another six months.

During the bi-monetary policy, RBI, Governor, Shaktikanta Das stated this classification will be extended for another six months up to September 30, 2021. This is the third extension by the regulator. In August 2019, when it was announced it was available until March 31, 2020. This dispensation was later extended up to March 31, 2021.

Up to 5 per cent of a bank’s total PSL has to go for on-lending to agriculture, MSME, and housing. “An amount of around Rs 37,000 crore has been lent by banks to NBFCs for on-lending to the specified priority sectors by December 2020,” RBI stated. The regulator stated this extension will ensure continued availability of credit to these sectors to aid faster economic recovery.

Meanwhile, during the policy, the Monetary policy committee (MPC) voted unanimously to keep the repo rate unchanged, stated RBI Governor Shaktikanta Das. He stated the regulator will maintain an accommodative stance as long as necessary to mitigate the impact of the COVID-19 pandemic.

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