RBI Current Affairs

RBI keeps repo rate unchanged at 6%

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 (LAF).

It was RBI’s fifth bimonthly policy review for financial year 2017-18. The decision was in line with market expectations and consistent with neutral stance of monetary policy in consonance with objective of achieving medium-term inflation target of 4% within a 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 changed to 19.5% from 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.

Tags:

India not to pursue Islamic banking: RBI

The Reserve Bank of India (RBI) has decided not to pursue a proposal to introduce Islamic banking in India. Decision in this regard was taken after considering wider and equal opportunities available to all citizens to access banking and financial services.

Islamic banking

Islamic banking is banking or banking activity that is consistent with the principles of sharia and its practical application through the development of Islamic economics. Sharia prohibits the fixed or floating payment or acceptance of specific interest of fee for loan of money. It is different from regular banking in that it prohibits earning of interest (or riba) through the business of lending.

Background

The proposal to introduce Islamic banking was first made in 2008 by a committee on financial sector reforms chaired by former RBI Governor Raghuram Rajan. The committee had recommended that interest-free banking techniques should be operated on larger scale to give access to those who are unable to access banking services, including those belong to economically disadvantaged section of society.

The 2015 World Bank report estimates Sharia-compliant financial assets to be in range of US 2 trillion dollars, covering bank and non-bank financial institutions, capital markets, money markets and insurance. The Islamic Finance Industry is expanding at rate of 10%-12% annually.

Tags:

12345...102030...182