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 stands unchanged at 3.35 per cent.
- The MPC also decided 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.
The Meeting of the Monetary Policy Committee (MPC), constituted under section 45ZB of the Reserve Bank of India Act, 1934, was held from 4 to 6 August 2021.
Monetary Policy Committee Members
- Shri Shaktikanta Das,
- Dr. Shashanka Bhide,
- Dr. Ashima Goyal,
- Dr. Mridul K. Saggar,
- Dr. Michael Debabrata Patra
- Prof. Jayanth R. Varma
Note: MPC voted 5-1 to keep monetary policy stance "accommodative".
RBI Monetary Policy Key Decisions
- The central bank retained the gross domestic product (GDP) growth projection for the current fiscal from 10.5% to 9.5 per cent.
- The economy witnessed a record contraction of 7.3 per cent for the previous fiscal 2020-21, recording its worst-ever performance in over four decades.
- Retail inflation was at 6.26% in June, 226 basis points above the RBI's medium-term target of 4.00%.
- Govt's decision to dip into cash balances for GST borrowing should assuage market fears of extra borrowing.
- RBI extends the on-tap TLTRO scheme deadline till 31st Dec 2021.
- RBI to conduct two more GSAP purchases worth Rs 25,000 crore each on 12th and 26th Aug 2021.
- VRRR ops size increased gradually to 2.5 lakh crore, 3 lakh crore, 3.5 lakh crore and 4 lakh crore.
- CPI inflation is seen at 5.7% for FY22; CPI inflation for the first quarter of FY23 seen at 5.1%
- April-June GDP growth seen at 21.4%; July-September at 7.3%; October-December at 6.3%.
- Economic activity is likely to gather progress as vaccinations pick up.
RBI Monetary Policy Rates
|Policy Repo Rate||4.0%|
|Reverse Repo Rate||3.35%|
|Marginal Standing Facility Rate||4.25%|
RBI Monetary Reserve Ratios
Note: The next meeting of the MPC is scheduled from October 6 to 8, 2021.
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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