MPC Current Affairs

RBI keeps key rates unchanged in fifth bi-monthly monetary policy review

The Reserve bank of India (RBI) in its fifth bi-monthly monetary policy review for year 2016-17 has kept key rates unchanged.

Decision in this regard was taken by RBI’s six-member Monetary Policy Committee (MPC) headed by Governor Urjit Patel. This decision was taken on the basis of an assessment of the current and evolving macroeconomic situation. 

Policy Rates

  • Repo rate under the liquidity adjustment facility (LAF): Unchanged at 6.25 percent.
  • Reverse repo rate under the LAF: Unchanged at 5.75 per cent.
  • Marginal standing facility (MSF) and Bank Rate: Unchanged at 6.75 per cent.
  • Reserve Ratios Cash Reserve Ratio (CRR) of scheduled banks: Unchanged at 4.0 per cent of net demand and time liability (NDTL).
  • Statutory Liquidity Ratio (SLR): Unchanged 20.75 per cent.

The policy repo rate where kept unchanged citing global and domestic uncertainties that posed upside risks to inflation. The MPC also has cut Gross Value Added (GVA) growth estimates for the economy in the fiscal year ending March 2017 to 7.1% from 7.6% earlier.

Thus, RBI has retained its “accommodative” monetary policy stance with the objective of achieving consumer price index (CPI) inflation at 5% by Q4 of 2016-17 and the medium-term target of 4% within a band of +/- 2 per cent, while supporting growth.

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Union Government notifies constitution of Monetary Policy Committee

The Union Government has notified the constitution of the six members Monetary Policy Committee (MPC).

In this regard, the Union Finance Minister has used powers designated under the section 45ZB of the Reserve Bank of India (RBI) Act, 1934 to constitute MPC.

Composition of MPC

  • Urjit Patel: RBI Governor (Chairperson).
  • R Gandhi: Deputy Governor RBI in charge of Monetary Policy (Member).
  • Michael Patra: Executive Director of RBI (Member).
  • Chetan Ghate: Professor, Indian Statistical Institute (ISI) (Member).
  • Professor Pami Dua: Director, Delhi School of Economics (DSE) (Member).       
  • Ravindra H. Dholakia: Professor Indian Institute of Management (IIM), Ahmedabad (Member).

About Monetary Policy Committee (MPC)

  • The six member MPC has been entrusted with the task of fixing the benchmark policy rate (repo rate) required to contain inflation within the specified target level.
  • It will help in determining the Monetary Policy which in turn adds value and transparency to monetary policy decisions.
  • The meetings of the MPC will be held at least 4 times a year and it will publish its decisions after each such meeting.
  • The RBI Act was amended by the Finance Act, 2016 to provide for a statutory and institutionalised framework for MPC.
  • Composition of MPC: As per the provisions of the RBI Act, out of the six Members of MPC, three Members will be from the RBI and other three will be appointed by the Central Government.
  • Governor of RBI (ex officio Chairperson), Deputy Governor of RBI, in charge of Monetary Policy (Member), One officer of RBI (Member) and three members appointed by Central Government as members.

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