After RBI’s 3rd Bi-Monthly Policy, here comes the much awaited Fourth Bi-monthly Policy Review 2017-18.
The Reserve Bank of India has released its 4th Bi-Monthly Policy Review on 4th October 2017. RBI has kept the repo rate i.e. the key policy rate unchanged, thus maintained its status quo.
The six-member Monetary Policy Committee headed by Dr. Urjit Patel, voted in the ratio of 5:1. Five members of the committee were in favour of the Monetary Policy decision, whereas Ravindra Dholakia voted for 0.25 percent reduction in rates.
What is Monetary Policy? A Brief Introduction about the Term and Its Objectives
Monetary Policy is the process by which monetary authority of a country (central bank) controls the supply of money in the economy.
In India, the central monetary authority is the Reserve Bank of India (RBI) that maintains the price stability in the economy of the country.
It could be executed by its control over interest rates in order to maintain price stability and achieve high economic growth.
As defined by RBI, there are some other major objectives of the monetary policy of India, and these are: –
1. Price Stability 2. Controlled Expansion of Bank Credit
3. Promotion of Fixed Investment 4. Restriction of Inventories and stocks
5. To Promote Efficiency 6. Reducing the Rigidity
Know more about RBI Governors: A complete list of the past and present governors [UPDATED]
How Dr. Patel made the final decision on the Monetary Policies?
Dr. Patel has made the decisions regarding the policy after a discussion with the other members of Monetary Policy Committee (MPC).
The RBI Monetary Policy Committee is a combination of six members:
1. Chetan Ghate (Government-appointed Economist)
2. Pami Dua (Government-appointed Economist)
3. RH Dholakia (Government-appointed Economist)
4. Viral A Acharya (Deputy Governor)
5. Michael Patra (Executive Director of RBI)
6. Urjit Patel (RBI Governor)
Highlights of RBI’s Fourth Bi-Monthly Monetary Policy Statement for 2017-18
Based on the assessment of current and evolving macroeconomic situation at the meeting held on 4th October 2017, the Monetary Policy Committee (MPC) has made the following decisions.
1. To Keep the Repo Rate under liquidity adjustment facility (LAF) unchanged at 6.0 percent.
2. Reverse Repo Rate under liquidity adjustment facility (LAF) remains unchanged at 5.75 percent.
3. Statutory Liquidity Ratio (SLR) cut by 50 basis points.
4. Cash Reserve Ratio remains unchanged at 4.0 percent.
5. Bank Rate and Marginal Standing Facility (MSF) both remain unchanged at 6.25%.
Key Rates after Fourth Bi-Monthly Policy 2017-18
|S. No.||Instruments||Past Rates||Current Rates|
|1.||Repo Rate||6.0%||6.0% (Unchanged)|
|2.||Reverse Repo Rate||5.75%||5.75% (Unchanged)|
|3.||Cash Reserve Ratio (CRR)||4%||4% (Unchanged)|
|4.||Bank Rate||6.25%||6.25% (Unchanged)|
|5.||Marginal Standing Facility (MSF)||6.25%||6.25% (Unchanged)|
|6.||Statuary Liquidity Ratio (SLR)||20.00%||19.50 % (Reduced by 50 basis points)|
Get the details of Key Policy Rates- Important Banking Terms!
6. The Central Bank has lowered Economic growth forecast to 6.7 percent from 7.3 percent for the financial year 2017-18.
7. The RBI has medium-term target for CPI inflation at 4%. According to the Central Bank, the inflation is expected to rise from its current level. This rise will be between 4.2 % to 4.6% in the second half of 2017-18.
8. The implementation of the Goods and Service Tax so far also appears to have had an adverse impact, rendering prospects for the manufacturing sector uncertain in the short term.
9. RBI continues to work towards the resolution of stressed corporate exposures in bank balance sheets.
10. According to RBI, various structural reforms introduced in the recent period will likely to enhance growth over long term by improving business environment, transparency and increasing formalization of the Economy and Indian Banking System.
11. The RBI suggested concerted drive to restart stalled investment projects, enhance ease of doing business, including implification of the GST to boost growth.
12. The bank also suggests rationalization of “excessively high” stamp duties charged by states, faster rollout of affordable housing programme.
13. Crude oil prices hit a two year high in September.
To be Noted
The minutes of the MPC’s meeting will be published on 18th October 2017.
The next meeting of the MPC is scheduled on 5th and 6th December 2017.
In this article, we have summed up all the details of RBI’s 4th Bi-Monthly Policy Statement 2017-18.
If you have any queries regarding the decision taken by the Monetary Policy Committee, kindly place them in the comment box provided below.
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