RBI KEEPS REPO, REVERSE REPO RATES UNCHANGED
The Reserve Bank of India decided to keep the policy repo rate under the liquidity adjustment facility (LAF) unchanged at 6.0 per cent.
- Consequently, the reverse repo rate under the LAF remains at 5.75 per cent, and the marginal standing facility (MSF) rate and the Bank Rate at 6.25 per cent.
- The central bank raised its March quarter Consumer Price Index (CPI) inflation forecast to 5.1% and projected an inflation range of 5.1-5.6% in the first half of the next fiscal year.
- RBI posits a revival in growth—projecting an acceleration in economic growth to 7.2% from a level of 6.6% in the current fiscal year. It premises this on a host of factors including revival in investment demand and strengthening exports.
LEARNING WITH TIMES
The Reserve Bank of India is the supreme monetary and banking authority in the country. It keeps the cash reserve of all scheduled banks and hence is known as Reserve Bank. It was established on April 1, 1935 in accordance with the provisions of the Reserve Bank of India Act, 1934. Though originally privately owned, since nationalisation in 1949, the Reserve Bank is fully owned by the Government of India. Its main function includes; formulate, implements and monitors the monetary policy, prescribes broad parameters of banking operations within which the country’s banking and financial system functions, Manages the Foreign Exchange Management Act, 1999, Issues and exchanges or destroys currency and coins not fit for circulation, Banker to the Government: performs merchant banking function for the central and the state governments; also acts as their banker. RBI Governor Urjit Patel .
BANK RATE: It is a rate of interest at which the central bank lends money to the lower bank. It is a quantitative method of credit control.
REPO RATE: Also known as repurchased auction. When there is liquidity shortage, government repurchases government securities and payment is made to banks. It adds liquidity to market.
REVERSE REPO RATE: When the government sell dated government securities to banks to suck considerable liquidity in the market. Both repo and reverse repo rates are liquidity Adjustment Ratio (LAR).
MONETARY POLICY: Monetary policy is the macroeconomic policy laid down by the central bank. It involves management of money supply and interest rate and is used by the government of a country to achieve macroeconomic objectives like inflation, consumption, growth and liquidity.Monetary policy can be expansionary and contractionary in nature. Increasing money supply and reducing interest rates indicate an expansionary policy. The reverse of this is a contractionary monetary policy.