RBI Governor Current Affairs - 2020

Repo rate keeps unchanged at 6.5%

Reserve Bank of India (RBI) in its fifth bimonthly monetary policy review for financial year 2018-19 has decided to maintain status quo in policy rates by keeping repo rate unchanged at 6.5%. The reverse repo rate has also been maintained at 6.25%.  This decision was taken by RBI’s six member Monetary Policy Committee (MPC) headed by RBI Governor Urjit Patel.

Key Facts

The decision of MPC is consistent with stance of calibrated tightening of monetary policy in consonance with objective of achievingmedium-term target for consumer price index (CPI) inflation of 4% within band of +/- 2 per cent, while supporting growth. It has projected retail inflation projection lowered in the range of 2.7-3.2% for 2nd half of 2018-19; 3.8-4.2% in first half of 2019-20. It has forecasted GDP growth for 2018-19 at 7.4% and 7.5% for first half of 2019-20.

Policy Rates

Repo rate: It was unchanged at 6.5%. It is rate at which RBI lends to its clients generally against government securities.

Reverse Repo Rate: It was unchanged at 6.25%. It is rate at which banks lend funds to RBI.

Marginal Standing Facility (MSF) Rate: It was unchanged at 6.75%. 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.

Bank Rate: It was unchanged at 6.75%. It is rate charged by central bank for lending funds to commercial banks. Higher bank rate will translate to higher lending rates by banks. It influences lending rates of commercial banks.

Cash Reserve Ratio (CRR): It was unchanged at 4%. It is amount of funds that banks have to keep with RBI. The RBI uses CRR to drain out excessive money from system.

Statutory Liquidity Ratio (SLR): It cut by 25 basis points to 19.25% from January 1, 2019. 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. It will be reduced by 25 basis points every quarter until it reaches the 18% level.

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RBI Governor Urjit Patel appointed to Financial Stability Institute Advisory Board

RBI Governor Urjit Patel was appointed to Financial Stability Institute Advisory Board (FSAB) or Bank of International Settlement (BIS). BIS is international financial organisation owned by 60 member central banks across world.

The Financial Stability Institute (FSI) of BIS assists financial sector authorities worldwide in strengthening their financial systems. Since beginning of 2017, FSI has been implementing new strategy that includes achieving closer interaction with central banks and financial supervisory agencies.

FSI Advisory Board

The FSI was jointly established by BIS and the Basel Committee on Banking Supervision in 1998.  Its mandate is to promote cross- sectoral and cross-border supervisory contacts and cooperation. The advisory Board will provide strategic advice to help FSI continue to meet its mandate in way that is responsive to changing needs of its key stakeholders around the world. It will comprise small diverse group of central bank Governors, heads of financial sector supervision and chairs of standard-setting bodies and regional supervisory groups.

Bank for International Settlements (BIS)

BIS is international financial organisation owned by 60 member central banks, representing countries from around the world including India. It fosters international monetary and financial cooperation and serves as bank for central banks. It carries out its work through its meetings, programmes and through Basel Process – hosting international groups pursuing global financial stability and facilitating their interaction. Its headquarter is in Basel, Switzerland.

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