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Abhilasha G @Eduncle posted an Article
June 10, 2019 • 11:01 am

Highlights of RBI's first Bi-Monthly Monetary Policy Review 2019-20

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RBI First Bi-Monthly Policy Review

 

Hello Readers,

With the beginning of the new fiscal year, the Indian Economy starts afresh with new policies and strategies approved by the Finance Minister.
 
We all know the fact that from 1st April our fiscal year starts and lasts until 31st March of the next calendar year.

Every year, RBI’s monetary policy committee releases the first bi-monthly monetary policy statement in April to control the supply of money in the economy.

The MPC gives monetary policy analysis and reviews interest rates to maintain price stability and achieve high economic growth.

On 6th April 2019, Reserve Bank of India has issued its First BI-monthly Monetary Policy Statement for 2019-20.

 

Must Read Blog for Detail Information about- Indian Banking System

 

Key Changes - Repo Rate Reduced, MSF & Reverse Repo Rate Revised

 

The big decision to cut down the Reverse Repo Rate was taken by Shaktikant Das (RBI Governor) and other members of the Monetary Policy Committee (MPC) to keep monetary policy 'neutral'.


Four out of six MPC members (Pami Dua, Ravindra Dholakia, Michael Debabrata Patra and Shaktikanta Das) voted in favour of the decision to cut down the repo rate.


On the other hand, Chetan Ghate and Viral Acharya voted to keep the policy rate unchanged.

 

 

Have a look on RBI Governors: A complete list of the past and present governors [UPDATED]

 

 

Finalized Key Policy Rates after 1st Bi-monthly Monetary Policy 2019-20

S. No. Instruments Past Rates Current Rates
1. Repo Rate 6.25% 6.0% (Reduced)
2. Reverse Repo Rate 6.0% 5.75% (Reduced by 25 basis points)
3. Cash Reserve Ratio (CRR) 4% 4% (Unchanged)
4. Bank Rate 6.50% 6.25% (Reduced)
5. Marginal Standing Facility (MSF) 6.50% 6.25% (Reduced)
6. Statuary Liquidity Ratio (SLR) 19.25% 19.25% (Unchanged)

 

Reduced the Repo Rate at 6.00% by 25 basis points and CRR at 4%.


Adjusted the Reverse Repo Rate to 5.75% under LAF by 25 Basis Points.


Reduced Marginal Standing Facility Rate (MSF) and Bank Rate to 6.25%.

 

 

Want to know all the rates in details? Read Important Banking Terms!

 

Vital Outcomes of RBI's First Bi-Monthly Policy Statement 2019-20

 

There were some important decisions taken by RBI MPC committee that we can understand as follows: -

 

As per the RBI Statement, reasons of changing Reverse Repo Rate is to achieve the medium-term objective of maintaining inflation at 4% level while supporting growth.

The RBI has projected GDP growth at 7.2% for the financial year 2019-20.
The reduction in rates will help commercial banks to provide benefits of lower lending rates to the loan borrowers.

Economic Growth is expected to be in the range of 6.8-7.1% in the first half and in the range of 7.3-7.4% in the second half of the current financial year.

Assuming a normal monsoon in 2019, the RBI has expected its CPI inflation projection to 2.4% in the fourth quarter.

RBI expects inflation at 2.9-3.0% for the first half and 3.5-3.8% in the second half of the current financial year 2019-20.

Additional 2.0% of SLR to be estimated as Level 1 High-Quality Liquid Assets (HQLAs) for the purpose of computing the LCR of banks.

The Reserve Bank of India has planned to set up a Task Force to study the relevant aspects, including best international practices for corporate loans in India.

The Reserve Bank is in the talk with the Government and SEBI to open a separate channel for international investors by allowing them to invest through International Central Securities Depositories (ICSDs).

 

 

To be Noted

 

The minutes of the MPC’s meeting will be published on April 20, 2019.

 

The next meeting of the MPC is scheduled on June 5 and 6, 2019.

 

 

 

 

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Important Abbreviations Used in this Article

 

S. No.

Important Abbreviations

Full Forms

1.

RBI

Reserve Bank of India

2.

MSF

Marginal Standing Facility

3.

MPC

Monetary Policy Committee

4.

CRR

Cash Reserve Ratio

5.

SLR

Statuary Liquidity Ratio

6.

RRR

Reserve Repo Rate

7.

GDP

Gross Domestic Product

8.

CPI

Consumer Price Index

9.

HQLAs

High-Quality Liquid Assets

10.

LCR

Liquidity Coverage Ratio

11.

ICSDs

International Central Securities Depositories

12.

LAF

Liquidity Adjustment Facility

13.

SEBI

Securities and Exchange Board of India

 

We have mentioned all the important points and decisions of first bi-monthly monetary policy review 2019-20 in this article. If you have any query, kindly drop them in the comment box below. Also, share this useful information with your friends.

 

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