The Monetary Policy Committee (MPC) at its meeting on August 6 announced that Reserve Bank of India has kept the repo rate unchanged at 4% and the reverse repo rate unchanged at 3.35%. MPC voted to maintain an accommodative stance with a 5-1 majority.

The MPC also decided to continue with the accommodative stance as long as necessary to revive and sustain growth on a durable basis and continue to mitigate the impact of COVID-19 on the economy, while ensuring that inflation remains within the target going forward.

RBI retained the GDP growth target for FY22 at 9.5%. The bank has raised GDP growth forecast for Q1FY22 but lowered estimates for remaining three quarters. CPI inflation estimate for FY22 is raised to 5.7% from 5.1%.

Further RBI has decided to extend the On-tap TLTRO scheme till Dec. 31, 2021. "Extension in period of relaxation on Marginal Standing Facility till Dec. 31, 2021," said RBI Governor Shaktikanta Das.

RBI to conduct two more auctions of Rs 250 billion each on August 12 and August 26 under the G-sec Acquisition Programme (G-SAP 2.0).

Commenting on RBI MPC Policy, Nitin Shanbagh, Head-Investment Products, Motilal Oswal Private Wealth said, "RBI continues to prioritize growth and maintain financial stability as far as necessary. Having said, it remains mindful of anchoring inflation expectations.

While maintaining a balance between growth/inflation dynamics, RBI is likely to continue with orderly evolution of the yield curve through OMOs & GSAPs. Till durable growth recovery is seen, RBI may not resort to reversal of policy rates and would maintain sufficient liquidity in the system. However, RBI may gradually signal towards normalization of rates.

From investors point of view, focus should be towards investing in high quality roll down accrual strategies through a bar-bell approach viz. combination of short term and long-term maturity strategies with weighted average portfolio average maturity of 4-5 years. For yield enhancement, investors can also consider investing upto 25% in well researched REITs, InVits, select high yield MLDs, etc."