The six-member monetary policy committee of the Reserve Bank of India (RBI) headed by Governor Shaktikanta Das, has decided to keep key lending rates unchanged for the sixth consecutive time, in its June 2021 policy review meeting held between June 2 to 4, 2021. The RBI’s Monetary Policy Committee (MPC) has decided to continue with an accommodative stance until necessary to mitigate the impact of COVID-19. The next meeting of the MPC is scheduled from August 4 to 6, 2021.
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The Marginal Standing Facility (MSF) rate and bank rates remain unchanged:
RBI Monetary Policy Highlights & Key Decisions:
The composition of the Monetary Policy Committee is as follows:
Some important instruments of Monetary Policy:
The RBI’s Monetary Policy has several direct and indirect instruments which are used for implementing the monetary policy. Some important instruments of Monetary Policy are as follows:
Repo Rate: It is the (fixed) interest rate at which banks can borrow overnight liquidity from the Reserve Bank of India against the collateral of government and other approved securities under the liquidity adjustment facility (LAF).
Reverse Repo Rate: It is the (fixed) interest rate at which the Reserve Bank of India can absorb liquidity from banks on an overnight basis, against the collateral of eligible government securities under the LAF.
Liquidity Adjustment Facility (LAF): The LAF has overnight as well as term repo auctions under it. The term repo helps in the development of the inter-bank term money market. This market sets the benchmarks for the pricing of loans and deposits. This helps in improving the transmission of monetary policy. As per the evolving market conditions, the Reserve Bank of India also conducts variable interest rate reverse repo auctions.
Marginal Standing Facility (MSF): MSF is a provision that enables the scheduled commercial banks to borrow an additional amount of overnight money from the Reserve Bank of India. Bank can do this by dipping into their Statutory Liquidity Ratio (SLR) portfolio up to a limit at a penal rate of interest. This helps the banks to sustain the unanticipated liquidity shocks faced by them.
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