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Monetary policy and liquidity operations during 2020-21 were geared towards mitigating the impact of COVID-19 pandemic. The monetary policy committee (MPC) cut the policy repo rate by 115 basis points (bps) during March-May 2020, on top of a cumulative reduction of 135 bps during February 2019 to February 2020. Backed by conventional and unconventional liquidity measures, these actions bolstered financial market sentiments while ensuring orderly market conditions. Interest rates and bond yields declined across market segments and spreads narrowed, with a distinct improvement in monetary transmission.


 In the face of COVID-19 related stress and the large contraction in output, and in consonance with the monetary policy stance, the Reserve Bank undertook several monetary policy measures, both conventional and unconventional, during 2020-21, driven by the goals of

 (i) improving monetary transmission; 

(ii)facilitating and incentivising bank credit flows; 

(iii)addressing sector-specific liquidity constraints in the face of COVID-19 related dislocations; and 

(iv) reinvigorating markets by easing financial stress and ensuring financial stability.

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