RBI’s Fourth bi- monthly Policy: Salient points for Bank Exams
The Reserve Bank of India released India’s fourth bi- monthly Policy for the financial year 2017-18. The last monetary policy was released in the month of August. The Monetary policy is basically released by Monetary Policy Committee (MPC) which consist six members.
Key Points of Fourth Monetary Policy:
- The repo (repurchase option) rate* will stay at 6 percent. The rate was cut by 25 bps in third monetary policy.
- The reverse repo rate remains unchanged at 5.75 percent.
- Cash Reserve Ratio remains unchanged at 4 percent.
- The Central Bank reduced the statutory liquidity ratio (SLR)* by 50 bps to 19.50%. Earlier it was 20%. This transition aims to meet the risk-based capital requirements as per Basel III* framework.
- The MSF (Marginal Standing Facility) and Bank Rate also remain unchanged at 6.25 percent.
- The GDP forecast for the year 2017-18 is lowered this time by RBI and it down to 6.7 %. Earlier it was projected 7.3%.
- The monetary policy committee raised the Inflation forecast to 4.2 -4.6 % for second half of the financial year 2017-18
*Repo rate: the rate at which central banks lends to commercial banks for short term duration.
*SLR: It is the minimum proportion of deposits that banks have to maintain in form of Gold or government securities.
CRR*: It is the specified minimum percentage of cash deposits that commercial banks have to keep with RBI on a fortnightly basis.
*Basel III Accord: It is a framework for capital and liquidity standards for banking system worldwide. It establishes tougher capital standards through more restrictive capital definitions, higher risk-weighted assets, additional capital buffers, and higher requirements for minimum capital ratios. The Indian Basel III framework for bank risk-based capital requirements came into force in April 2013. It observed that several aspects of the Indian framework were more conservative than the Basel framework.
Do You Know?
The members of Monetary Policy Committee (MPC) are-