Reserve Bank of India (RBI) has announced its third Bi-Monthly Monetary Policy Rates for 2019-20 in Mumbai today.
Third Bi-monthly policy has been released based on the assessment of the Monetary Policy Committee of the Reserve Bank of India (RBI). Monetary Policy Rates are crucial for the exam, especially Banking awareness.
The Reserve Bank of India in its third Bi-Monthly statement 2019-20 has made the following announcements -
The RBI reduced the policy repo rate under the liquidity adjustment facility (LAF) by 35 basis points (bps) from 5.75 per cent to 5.40 per cent with immediate effect.
Consequently, the reverse repo rate under the LAF stands revised to 5.15 per cent and
The marginal standing facility (MSF) rate and the Bank Rate to 5.65 per cent.
The MPC also decided to maintain the accommodative stance of monetary policy.
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.
Current Policy Rates:
Policy Repo Rate5.40%Reverse Repo Rate5.15 %Marginal Standing Facility Rate5.65%Bank Rate5.65%
Reserve Ratios:
CRR
4 %
SLR
18.75%
The remaining policy statements would be released by RBI as stated below -
Policy StatementDates of ReleaseFirst Bi-monthly Monetary Policy Statement for 2019-204th April 2019Third Bi-monthly Monetary Policy Statement for 2019-207th August 2019Fourth Bi-monthly Monetary Policy Statement for 2019-204th October 2019Fifth Bi-monthly Monetary Policy Statement for 2019-205th December 2019Sixth Bi-monthly Monetary Policy Statement for 2019-206th Feb 2020
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.
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