Repo rate 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.

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RBI cuts repo rate by 25 basis point

Reserve Bank of India (RBI) has cut down repo rate by 25 basis points to 7.75 percent from 8 percent, with immediate effect.

It was announced ahead of the scheduled date of monetary policy announcement on 3rd February 2015 as part of RBI’s 6th bi-monthly monetary policy statement.

RBI’s 6th bi-monthly monetary policy statement says that

  • Repo rate: RBI has reduced the policy repo rate under the liquidity adjustment facility (LAF) by 25 basis points from 8.0 per cent to 7.75 per cent.
  • Cash reserve ratio (CRR): RBI has unchanged CRR and kept it at 4.0 per cent of net demand and time liabilities (NDTL).
  • Reverse repo rate: RBI has adjusted reverse repo rate under the LAF to 6.75 per cent.
  • While, RBI has adjusted Marginal standing facility (MSF) rate and the Bank Rate to 8.75 per cent with immediate effect.

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