▪️The six member Monetary Policy Committee (MPC) of Reserve Bank of India (RBI) has decided to maintain status quo in policy rates by keeping repo rate unchanged at 6.0% under liquidity adjustment facility. It was RBI’s fifth bimonthly policy review for financial year 2017-18.
▪️The decision of MPC was consistent with neutral stance of monetary policy in consonance with objective of achieving medium-term inflation target of 4% within a ( DailyGKZone ) band of +/- 2%, while supporting growth.
✔️ Policy Rates
▪️Repo rate: It is rate at which RBI lends to its clients generally against government securities. It was unchanged at 6%.
▪️Reverse Repo Rate: It is rate at which banks lend funds to RBI. It was unchanged at 5.75%.
▪️Marginal Standing Facility (MSF) Rate: It is rate at which scheduled banks can borrow funds overnight from RBI against government securities. It is very short term borrowing scheme for scheduled banks. It was unchanged at 6.25%.
▪️Bank Rate: It is rate charged by central bank for lending funds to commercial banks. It was unchanged 6.25%. It influences lending rates of commercial banks. Higher bank rate will translate to higher lending rates by banks.
▪️Cash Reserve Ratio (CRR): It is amount of funds that banks have to keep with RBI. It was unchanged at 4%. The RBI uses CRR to drain out excessive money from system.
▪️Statutory Liquidity Ratio (SLR): It was unchanged 20%. It is amount that banks have to maintain a stipulated proportion of their net demand and time liabilities (NDTL) in form of liquid assets like cash, gold and unencumbered securities, treasury bills, dated securities etc.