RBI’s Monetary Policy Statement February 2022: Know Committee Members, Policy Rate, Ratio, Decision

On the basis of an assessment of the current and evolving macroeconomic situation, the Monetary Policy Committee (MPC) at its meeting decided to:

• Keep the policy repo rate under the liquidity adjustment facility (LAF) unchanged at 4.0 per cent.
• The Marginal Standing Facility (MSF) rate and the Bank rate remain unchanged at 4.25 per cent.
• The reverse repo rate also remains unchanged at 3.35 per cent.
• The MPC flagged the potential downside risks to economic activity from the highly contagious Omicron variant.
• These decisions are in consonance with the objective of achieving the medium-term target for consumer price index (CPI) inflation of 4 per cent within a band of +/- 2 per cent while supporting growth.

The Meeting of the Monetary Policy Committee (MPC) was held from 8,9th and 10th February 2022.

What Is Monetary Policy Committee?

• MPC is a government-constituted body of the RBI, which is responsible for framing the monetary policy of the country, using the tools like repo rate, reverse repo rate, bank rates etc.
• The MPC has six members, three nominated by the government and three members of RBI.
• The RBI Governor is the ex-officio chairperson of the committee.
• MPC usually meets six times a year and has and each member has a tenure of four years.
• MPC decisions are taken by voting, where a simple majority (4 out of 6) is necessary for a decision to be passed.
• RBI Act, 1934 empowers the RBI to take Monetary Policy Decisions

Monetary Policy Committee Members

1. Shri Shaktikanta Das,
2. Dr Shashanka Bhide,
3. Dr Ashima Goyal
4. Dr Mridul K. Saggar,
5. Dr. Michael Debabrata Patra
6. Prof. Jayanth R. Varma

Note: The MPC decided by a majority of 5 to 1 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 Monetary Policy Key Decisions

• The RBI has retained its growth projection at 9.2 per cent and inflation at 5.3 per cent for the current financial year and 4.5% for FY 2022-23
• RBI sees GDP growth at 7.8% in 2022-23.
• E RUPI digital voucher cap raised from Rs 10,000 to Rs 1 lakh and multiple-use permitted
• VRR and VRRR of 14-day tenor – will operate as the main liquidity management tool
• Variable-rate repo operations of varying tenors will henceforth be conducted as and when warranted.
• NACH mandate limit to be increased to ₹3 crores for trade-related settlementsPSU Bank balance sheets are stronger than the previous year
• Extension of on tap liquidity for emergency health services and contact intensive sectors till June 30, 2022
• RBI will increase the mandate limit from Rs 1 crore to Rs 3 crore for trade credit to MSMEs
• RBI projects retail inflation for 2022-23 at 4.5%, with Q1 2022-23 at 4.9%, Q2 at 5%.
• On-tap liquidity facilities of Rs 50,000 crore and Rs 15,000 crore for emergency health services and contact-intensive sectors, respectively, were announced in May and June 2021. 

RBI Monetary Policy Rates

Policy Repo Rate	4.0%
Reverse Repo Rate	3.35%
Marginal Standing Facility Rate	4.25%
Bank Rate	4.25%

RBI Monetary Reserve Ratios

CRR	3%
SLR	18.00%

Let us now understand some common terms of the Policy rates – 

1. Repo Rate 

It is the rate at which RBI lends money to commercial banks.

2. Reverse Repo rate

It is the rate at which RBI borrows money from commercial banks.

3. Cash Reserve Ratio (CRR)

The share of net demand and time liabilities (deposits) that banks must maintain a cash balance with the Reserve Bank.

4. Statutory Liquidity Ratio (SLR)

The share of net demand and time liabilities (deposits) that banks must maintain in safe and liquid assets, such as, government securities, cash, and gold.

5. Bank Rate

It is the rate at which the Reserve Bank is ready to buy or rediscount bills of exchange or other commercial papers for the long term.

6. Marginal Standing Facility Rate (MSF)

The rate at which the scheduled banks can borrow funds from the RBI overnight, against the approved government securities is termed as MSF.

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