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RBI’s Fourth bi- monthly Policy: Salient points for Bank Exams

Oct 5, 2017 15:27 IST
    RBI’s 4th Monetary Policy: Highlights for Upcoming Bank Exams
    RBI’s 4th Monetary Policy: Highlights for Upcoming Bank Exams

    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.

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    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

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    *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.

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    The members of Monetary Policy Committee (MPC) are-

    • Dr. Urjit R. Patel
    • Dr. Chetan Ghate
    • Dr. Pami Dua
    • Dr. Viral V. Acharya
    • Dir Michael Patra
    • Dr. Ravindra H. Dholakia


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