RBI's Monetary Policy Statement April 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.
• Reverse repo rate at 3.35 percent.
• The standing deposit facility (SDF) rate will be at 3.75 per cent.
• The MPC also decided to remain accommodative while focusing on withdrawal of accommodation to ensure that inflation remains within the target going forward, while supporting growth.
• 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 on 6,7th and 8th April 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

RBI Monetary Policy Key Decisions

• RBI has revised the FY23 GDP forecast to 7.2% from the earlier projection of 7.8%
• A new tool introduced by the central bank is the SDF ( Standing Deposit Facility) to absorb liquidity.
• SDF will be the floor of the LAF corridor.
• A committee was proposed to set up to examine and review the current state of customer service in the RBI Regulated Entities (RE), adequacy of customer service regulations and suggest measure to improve the same.
• Now Inflation is projected at 5.7 per cent.
• India's 10-year bond yield rises to 7%, the highest since 2019.
• The FY23 GDP projection has assumed crude oil prices at $100 per barrel.
• Forex reserves are at $606.5 billion.
• Proposed to make cardless cash withdrawals across banks & ATMs using UPI.

RBI Monetary Policy Rates

RBI Monetary Reserve Ratios

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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