The Monetary Policy Committee (MPC) of RBI has announced the revised bank rates in its 4th Bi-Monthly Monetary Policy review on 4th Oct 2019.
RBI has reduced the repo rate by 25 basis point which is the fifth consecutive reduction in past eight months.
This decision was taken after all the MPC members voted in the favour of this reduction. In previous MPC meeting of RBI, the committee had reduced the repo by 35 basis points.
Have a look at the key points of RBI’s 4th Bi-Monthly Policy that we are going to discuss in the blog below:
Introduction of Monetary Policy & Objective
Key Rates after RBI’s 4th Bi-Monthly Review
Highlights of Monetary Policy Meeting’s Statements
What is Monetary Policy? A Brief Introduction 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 and economic growth by changing the interest rate.
As defined by RBI, there are some major objectives of the monetary policy of India, and these are:
Price & Exchange Rate Stability
Controlled Expansion of Bank Credit
Promotion of Fixed Investment
Restriction of Inventories and stocks
Economic Growth
Reducing the Rigidity
Let’s have a look at the updated bank rates:
| Key Rates after Fourth Bi-Monthly Policy 2019-20 |
|||
| S. No. |
Instruments |
Past Rates |
Current Rates |
| 1. |
Repo Rate |
5.40% |
5.15% (Reduced by 25 bps) |
| 2. |
Reverse Repo Rate |
5.15% |
4.9% (Reduced by 25 bps) |
| 3. |
Cash Reserve Ratio (CRR) |
4% |
4% (Unchanged) |
| 4. |
Bank Rate |
5.65% |
5.40% (Reduced by 25 bps) |
| 5. |
Marginal Standing Facility (MSF) |
5.65% |
5.40% (Reduced by 25 bps) |
| 6. |
Statuary Liquidity Ratio (SLR) |
18.75% |
19.50 % (Reduced by 50 bps) |
Get the details of Key Policy Rates - Important Banking Terms!
Highlights of RBI's 4th Bi-Monthly Monetary Policy Statement for 2019-20
The monetary policy committee of RBI consists six members, i.e, RBI Governor Mr. Shaktikant Das, Dr. Chetan Ghate, Dr. Pami Dua, Dr. Michael Debabrata Patra, Dr. Ravindra H. Dholakia and Shri Bibhu Prasad Kanungo.
Have a look at the complete list of past and present RBI Governors - List of RBI Governors of India
Amongst all the 6 members, Dr. Ravindra H. Dholakia has voted to reduce the repo rate by 40 bps while all other members of MPC have voted to reduce the repo rate by 25 basis points.
Based on the assessment of current situation at the RBI’s 4th Bi -Monthly meeting held on 4th October 2019, the MPC has made the following changes.
1. Reduction of Repo Rate under liquidity adjustment facility (LAF) by 25 basis points to 5.15%.
2. Reverse Repo Rate under liquidity adjustment facility (LAF) has been revised to 4.90%.
3. Statutory Liquidity Ratio (SLR) has been adjusted at 18.75%.
4. Cash Reserve Ratio remains unchanged at 4.0 percent.
5. Bank Rate and Marginal Standing Facility (MSF) has been revised to 5.40%.
6. The RBI has lowered the Economic GDP growth forecast to 6.1% from earlier 6.9% for the financial year 2019-20.
7. The RBI has projected the retail inflation at 3.4% for second quarter of 2019-20, 3.5-3.7% for second half of fiscal year and 3.6% for first quarter of 2020-21.
8. The government has reduced 10% point in corporate taxes and promises of front-loading bank recapitalisation to support the number.
9. The MPC is expecting the faster transmission of monetary policy to the bank lending rate.
10. The MPC has decided to continue with an accommodative stance as long as it is necessary to revive growth, while ensuring that inflation remains within the target.
| Important Upcoming Events |
| The minutes of the MPC’s meeting have been published on 18th October 2019. The next meeting of the Monetary Policy Committee is scheduled from 3rd to 5th December 2019. |
Suggested Reads:
RBI’s 3rd Bi-Monthly Policy 2019-20 Highlights | Repo Rate Cut by 35 bps
RBI’s 2nd Bi-Monthly Monetary Policy Review 2019-20 [Highlights]
Highlights of RBI’s first Bi-Monthly Monetary Policy Review 2019-20
In this article, we have summed up all the details of RBI’s 4th Bi-Monthly Policy Statement 2019-20. Hope it will help you in banking exam preparation.
If you have any query or suggestions regarding the monetary policy statement discussed in the article, feel free to share with us in the comment box below.
Thank you!
