RBI's Monetary Policy Statement June 2021

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

• Leave the policy repo rate unchanged at 4 per cent and maintain its accommodative stance as long as necessary at least through the current financial year to the next year to revive growth on a durable basis and mitigate the impact of COVID-19 on the economy.
• The Marginal Standing Facility (MSF) rate and the Bank rate remain unchanged at 4.25 per cent 
• The reverse repo rate stands unchanged at 3.35 per cent.

Note: These rates were kept unchanged during April's monetary policy review statement.

RBI Monetary Policy Key Decisions

• A separate liquidity window of Rs 15,000 crore for the hospitality sector.
• RBI to buy Rs 40,000 crore of govt securities on June 17; Rs 1.20 lakh crore G-Sec to be purchased in Q2
• MPC now sees CPI inflation at 5.1% in 2021-22; 5.2% in Q1, 5.4% in Q2, 4.7% in Q3 and 5.3% in Q4
• Normal monsoon to provide a tailwind for economic revival.
• RBI cuts FY22 GDP growth forecast to 9.5% from 10.5% earlier.

RBI Monetary Policy Rates

RBI Monetary Reserve Ratios

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

Repo Rate 

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

Reverse Repo rate

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

Cash Reserve Ratio (CRR)

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

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.

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.

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.