RBI Monetary Policy Rate: Key highlights (30 September, 2022)

RBI Monetary Policy Rate: Key highlights (30 September, 2022)

The Reserve Bank of India hikes its key lending rate by 50 basis points to 5.40 percent, the highest since 2019 and for the third time since the beginning of the current fiscal year.
The Reserve Bank of India’s rate-setting panel on Wednesday began its three-day deliberations on the next bi-monthly monetary policy.

The central bank has already announced to gradually withdraw its accommodative monetary policy stance.

Important Highlights of the monetary Policy:

  • Key short-term lending rate (repo) raised by 50 basis points (bps) to 5.90 per cent; fourth consecutive hike
  • The RBI has lowered the real gross domestic product (GDP) growth forecast for FY23 to 7% from 7.2%
  • RBI has maintained consumer price index (CPI) inflation forecast for FY23 at 6.7%

Current Policy Rate: Last Updated on 30 September 2022

Policy Rates
Repo Rate 5.90%
Reverse Repo Rate 3.35%
Marginal Standing Facility (MSF) Rate 6.15%
Bank Rate 6.15%
Cash Reserve Ratio 4.50%
Statutory Liquidity Ratio (SLR) 18%
Standing Deposit Facility Rate 5.65%

 

RBI Repo Rate History

Date Rate Change
30 Sept-22 5.9 0.5
5-Aug-22 5.4 0.5
8-Jun-22 4.9 0.5
May-22 4.4 0.4
9-Oct-20 4 0
6-Aug-20 4 0
22-May-20 4 0.4
27-Mar-20 4.4 0.75

 

Q.1. What is the Repo rate after the MPC held?

Ans. 5.90%

Q.2. What is the RBI’s 2022-23 GDP growth Projection of India?

Ans. 7.%

CRR – Cash Reserve Ratio – Banks in India are required to hold a certain proportion of their deposits in the form of cash. However Banks don’t hold these as cash with themselves, they deposit such cash(aka currency chests) with Reserve Bank of India , which is considered as equivalent to holding cash with themselves. This minimum ratio (that is the part of the total deposits to be held as cash) is stipulated by the RBI and is known as the CRR or Cash Reserve Ratio.

SLR – Statutory Liquidity Ratio – Every bank is required to maintain at the close of business every day, a minimum proportion of their Net Demand and Time Liabilities as liquid assets in the form of cash, gold and un-encumbered approved securities. The ratio of liquid assets to demand and time liabilities is known as Statutory Liquidity Ratio (SLR). RBI is empowered to increase this ratio up to 40%. An increase in SLR also restricts the bank’s leverage position to pump more money into the economy.

Note-The maximum limit of SLR is 40% and minimum limit of SLR is 0 In India
MSF – Marginal Standing facility It is a special window for banks to borrow from RBI against approved government securities in an emergency situation like an acute cash shortage. MSF rate is higher then Repo rate. 

Bank RateThis is the long term rate(Repo rate is for short term) at which central bank (RBI) lends money to other banks or financial institutions. Bank rate is not used by RBI for monetary management now. It is now same as the MSF rate. 

Repo rate is the rate at which the central bank of a country (Reserve Bank of India in case of India) lends money to commercial banks in the event of any shortfall of funds. Repo rate is used by monetary authorities to control inflation. 

Reverse Repo rate is the rate at which the Reserve Bank of India borrows funds from the commercial banks in the country. In other words, it is the rate at which commercial banks in India park their excess money with Reserve Bank of India usually for a short-term. 

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