Any Questions? info@beandbyias.com /+91 9958826967, 9958294810

LAW OPTIONAL Batch for CIVIL SERVICES 2022 Live classes Starting from 1st March 2021 | For registration call @ 9958294810 or mail at info@beandbyias.com |

RBI’s Monetary Policy Meeting-Repo Rate Unchanged

RBI’s Monetary Policy Meeting-Repo Rate Unchanged

CONTEXT:

  • The Reserve Bank of India’s Monetary Policy Committee has decided to keep its short-term lending rate or the repo rate, at 4 per cent, unchanged, in line with market expectations.

                                   IASbaba's Daily Current Affairs – 19th September, 2016 | IASbaba

ACCOMMODATIVE STANCE

  • Liquidity in the G-securities: The central bank also announced a series of measures to inject liquidity in

    • Government securities market and

    • Financial system.

  • Accommodative stance:  Shaktikanta Das said the central bank will maintain its ‘accommodative stance’ as long as required to sustain growth on a durable basis.

GROWTH VS INFLATION TRADE-OFF

  • The RBI’s decision comes amid a surge in Covid-19 cases, leading to fresh curfew restrictions, triggering concerns over the economic recovery that is underway.

  • The MPC voted unanimously to keep rates steady and retain the accommodative monetary policy stance.

      • RBI would do so while keeping a leash on inflation.

  • Consumer Price Index: The annual Consumer Price Index-based retail inflation rate rose to a 3 month high of 5.03 % in February.

  • Monetary policy should remain accommodative till prospects of sustained recovery are well secured.

PROJECTIONS ON GROWTH AND INFLATION

  • Retail inflation is projected to stay around 5 % next year.

  • The RBI maintained its GDP growth forecast at 10.5 % for 2021-22.

  • Slashed repo rate: The RBI has slashed the repo rate — benchmark lending rate — by a total of 115 basis points since March 2020,

    • Coming on top of the 135 bps of cumulative cuts since early 2019.

  • Basis points (BPS): It refers to a common unit of measure for interest rates and other percentages in finance. One basis point is equal to 1/100th of 1%, or 0.01%, or 0.0001.

GOVERNMENT BORROWING PROGRAMME

  • Government borrowing programme: RBI will ensure orderly conduct of government borrowing programme.

    • G-sec acquisition plan: In this respect, the central bank announced a secondary market government securities (G-sec) acquisition plan worth Rs 1 lakh crore for April-June.

  • Tightening G-sec bond market: These measures are announced amid a tightening in the G-sec bond market,

    • With yields hardening and

    • Expanding debt requirement of

      • Central governments and

      • State governments.

ASSET RECONSTRUCTION COMPANY

  • Amid the government plans to support a new asset reconstruction company.

  • Set up: by banks.

  • RBI committee: RBI has decided to set up a committee to review the working of ARCs

    • To ensure how better these entities can support the financial sector.

RTGS and NEFT to Prepaid payment instruments

  • In the policy review, the RBI decided to extend the RTGS and NEFT payments platforms to

    • Prepaid payment instruments

    • White label ATMs as well.

  • Prepaid payment instruments: It can come in the form of payment wallets, smart cards, magnetic chips, vouchers, mobile wallets etc.

    • Any instrument that can be used to access a prepaid amount is a PPI.

SOURCE: INDIAN EXPRESS