CURRENT AFFAIRS
CURRENT AFFAIRS
Description
Governor Shaktikanta Das said on April 5 that the RBI Monetary Policy Committee has agreed by a 5:1 majority to keep policy rates unchanged. He also stated that core inflation had steadily fallen. It is the first bi-monthly monetary policy for 2024-25. The Governor of the Reserve Bank of India (RBI) also indicated that the MSF and bank rates will remain at 6.75%. The Governor of the RBI kept the policy rate unchanged at 6.5%.
RBI Repo Rate Are As under
Policy Repo Rate: 6.50% (Unchanged)
Standing Deposit Facility (SDF): 6.25% (Unchanged)
Marginal Standing Facility Rate: 6.75% (Unchanged)
Bank Rate: 6.75% (Unchanged)
Fixed Reverse Repo Rate: 3.35% (Unchanged)
CRR: 4.50% (Unchanged)
SLR: 18.00% (Unchanged)
Key Decisions From April MPC
CPI inflation in Q1 was seen at 4.9%, Q2 at 3.8%, Q3 at 4.6%, and Q4 at 4.5%, said Shaktikanta Das.
Net FPI inflows stood at $41.6 billion, compared with outflows in FY22 and FY23, said the RBI Governor.
RBI will permit use of third-party UPI apps for making UPI payments from PPI wallets.
RBI will introduce mobile app to operate in retail direct portal for retail investors.
Total flow of resources to the commercial sector was at Rupees 31.2-lakh crore in FY24.
Real GDP Growth For FY25 Is Projected At 7%
Q1 at 7.1 %
Q2 at 6.9 %
Q3 and Q4 each at 7 %
The Meeting Of RBI’s Six-Member Panel Are Expected As Follows-
June 5-7, 2024
August 6-8, 2024
October 7-9, 2024
December 4-6, 2024
February 5-7, 2025
Members Of The RBI MPC
The RBI MPC is comprised of six members, including both external members and RBI officials. This includes the RBI Governor, 2 deputy governors, and 3 external members
Shaktikanta Das, Governor of RBI
Michael Debabrata Patra, Deputy Governor of RBI
Rajiv Ranjan, Officer of RBI nominated by the Central Board, Member
Professor Ashima Goyal, Professor, Indira Gandhi Institute of Development Research, Member
Professor Jayanth R. Varma, Professor, Indian Institute of Management Ahmedabad, Member
Dr. Shashanka Bhide, Senior Advisor, National Council of Applied Economic Research, Member.
RBI Repo Rate: Instruments Of Monetary Policy
Repo Rate- It is the interest rate at which the Reserve Bank provides liquidity to all liquidity adjustment facility (LAF) participants in exchange for government and other recognized securities as collateral.
Standing Deposit Facility (SDF) Rate- The rate at which the Reserve Bank accepts uncollateralized over night deposits from all LAF members. In addition to its liquidity management function, the SDF serves as a tool for financial stability. The SDF rate is set at 25 basis points below the policy repo rate. With the introduction of SDF in April 2022, the fixed reverse repo rate was substituted as the LAF corridor's floor.
Marginal Standing Facility (MSF) Rate- The penal rate at which banks can borrow from the Reserve Bank overnight by drawing on their Statutory Liquidity Ratio (SLR) portfolio up to a specified limit of 2%. This serves as a safety valve against unexpected liquidity shocks to the banking sector. The MSF rate is set at 25 basis points above the policy repo rate.
Liquidity Adjustment Facility- The LAF refers to the Reserve Bank's actions for injecting/absorbing liquidity into/from the banking sector. It includes overnight and term repo/reverse repos (fixed and variable rates), SDF, and MSF. Aside from LAF, liquidity management tools include outright open market operations (OMOs), FX swaps, and market stabilization schemes (MSS).
LAF Corridor- The LAF corridor is defined by the marginal standing facility (MSF) rate as the upper bound (ceiling) and the standing deposit facility (SDF) rate as the lower bound (floor), with the policy repo rate in the center.
Main Liquidity Management Tool- The primary liquidity management mechanism for addressing frictional liquidity requirements is a 14-day term repo/reverse repo auction at a variable rate that occurs in conjunction with the cash reserve ratio (CRR) maintenance cycle.
Fine Tuning Operations- Fine-tuning procedures, lasting overnight or longer, supplement the primary liquidity operation to account for any unexpected liquidity fluctuations throughout the reserve maintenance period. In addition, if necessary, the Reserve Bank holds longer-term variable rate repo/reverse repo auctions lasting more than 14 days.
Reverse Repo Rate- The reverse repo rate is the interest rate at which the Reserve Bank absorbs liquidity from banks using collateral government securities as collateral under the LAF. Following the adoption of SDF, the RBI will have the authority to conduct fixed rate reverse repo operations for purposes stated from time to time.
Bank Rate- The rate at which the Reserve Bank is willing to purchase or rediscount bills of exchange or other commercial paper. The Bank Rate is a penalty rate levied on banks that fail to meet their reserve requirements. The Bank Rate is published under Section 49 of the RBI Act of 1934. This rate has been aligned with the MSF rate and will vary automatically as the MSF rate and policy repo rates change.
Cash Reserve Ratio (CRR)- The average daily balance that a bank is required to maintain with the Reserve Bank as a percentage of its net demand and time liabilities (NDTL) as of the last Friday of the second preceding fortnight, as notified by the Reserve Bank from time to time in the Official Gazette.
Statutory Liquidity Ratio (SLR)- Every bank shall maintain in India assets whose value shall not be less than such percentage of the total of its demand and time liabilities in India as on the last Friday of the second preceding fortnight, as the Reserve Bank may, by notification in the Official Gazette, specify from time to time, and such assets shall be maintained as may be specified in such notification (typically in unencumbered government securities, cash and Gold)
Open Market Operations (OMOs)- These include the Reserve Bank's outright purchase/sale of government securities to inject/absorb long-term liquidity into the banking system.
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