The six-member Monetary Policy Committee (MPC) voted unanimously to keep the repo rate unchanged at 4 per cent. MPC committee keeps the reverse repo rate unchanged at 3.35 per cent as Russia’s invasion of Ukraine added to a rise in inflation. The Reserve Bank of India’s Monetary Policy Committee headed by Reserve Bank of India (RBI) Governor Shaktikanta Das kept the repo rate unchanged for the 11th consecutive time. The repo rate or the short-term lending rate was the last cut on May 22, 2020. Since then, the rate remains at a historic low of 4 per cent.
Buy Prime Test Series for all Banking, SSC, Insurance & other exams
The Marginal Standing Facility (MSF) rate and bank rates remain unchanged:
Key Points:
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.
Important takeaways for all competitive exams:
Dr. Bhimrao Ramji Ambedkar, also known as the "Father of the Indian Constitution," was a…
The RBI Governor is the Chief Executive Officer of the Central Bank of India and the…
Chaudhary Charan Singh (23 December 1902 – 29 May 1987) was a prominent Indian politician…
Rajasthan is a state in north-western India, known for its rich history, beautiful palaces, forts…
PV Sindhu is one of India's most celebrated badminton players, known for her exceptional skills,…
Wood is a natural material used in furniture, tools and decoration. It comes from trees…