Hello, Readers!
The Reserve Bank of India has announced the Sixth Bi-Monthly Monetary Policy statement on 7 February 2019. The Monetary Policy Committee (MPC) has taken various decisions and brought down the interest rates to the lowest.
The MPC has reduced the Repo Rate under the liquidity adjustment facility (LAF) to 6.25% from previous 6.50% based on the assessment of the current and developing macroeconomic situation.
The MPC meeting was chaired by Shri Shaktikanta Das (RBI Governor). Other members of the meeting included Dr. Ravindra H. Dholakia, Dr. Pami Dua, Dr. Michael Debabrata Patra, Dr. Chetan Ghate and Dr. Viral V. Acharya (Deputy Governor).
Monetary policy committee votes 4:2 in favour of a rate cut. MPC member Viral Acharya and Chetan Ghate voted to keep the policy rate unchanged, while Mr. Das and three others voted for a cut in interest rates.
RBI Governors: A complete list of the past and present governors [UPDATED]
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According to MPC, the environment for timely transmission of policy rates to banks’ lending rates will be considerably improved if the following actions could be done: -
The Indian Banking sector’s Non-Performing Assets (NPAs) are resolved more quickly and efficiently.
Recapitalization of the banking sector is accelerated.
The formula for adjustments in the interest rates on small savings schemes to changes in yields on government securities is fully implemented.
Key Policy Rates after Sixth Bi-monthly Policy Review |
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| No. | Instruments | Current Rates |
| 1. | Repo Rate | 6.25% (Reduced) |
| 2. | Reverse Repo Rate | 6.00% |
| 3. | CRR (Cash Reserve Ratio) | 4% |
| 4. | Bank Rate | 6.50% |
| 5. | MSF (Marginal Standing Facility) | 6.50% |
| 6. | SLR (Statutory Liquidity Ratio) | 19.25% |
Read the details of Key Policy Rates - Important Banking Terms!
In the Sixth Bi-monthly Monetary Policy Meeting of RBI, the following predictions were made:
Inflation
In December 2018 - 2.19% (18 month’s low).
In March - 2.8% and In the first half of 2019 - 3.2 - 3.4%.
In the third quarter of the fiscal year 2019 - 3.9%.
As inflation is slowing down, RBI Governor Mr. Das hinted at more rate cuts in the future.
GDP Growth
In the fiscal year 2019-20 - 7.4%.
In the fiscal year 2018-19 - 7.2%.
Export growth on a year-on-year basis was almost constant in November and December 2018.
NBFC Crisis
RBI has relaxed certain guidelines which will allow banks to lend more to stronger NBFCs.
The banking regulator also plans to merge some of the categories to ensure easier access to loans for these firms, also leading to improved management.
Important Decisions of RBI's Monetary Policy Committee
The Governor Mr. S Das said that “RBI lowered interest rates and shifted its stance to "neutral" from "calibrated tightening" to boost a slowing economy after a sharp fall in the inflation rate”.
RBI has received a proposal for setting up an umbrella organization for urban cooperative banks to help individuals with savings accounts and deposits in UCBs.
RBI has decided enhancement of collateral free agriculture loan from Rs 1 lakh to Rs 1.6 lakhs. This enhancement has been taken in view of the overall rise in inflation, marginal agriculture input and benefit to small farmers.
Operational freedom will be provided for Banks to offer interest rates to bulk deposits. The range of bulk deposits has been increased to Rs 2 crore from currently Rs 1 crore.
In this article, we have wrapped all the important highlights of the sixth bi-monthly policy of RBI. You can also take a look on to the important news and information suggested below:
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