In the first monetary policy of the new financial year, The Reserve Bank of India (RBI) kept the repo rate unchanged at 4 percent and the reverse repo rate at 3.35 per cent, maintaining an accommodative stance.

The MSF rate and the bank rate remain unchanged at 4.25 per cent

India’s GDP growth projection has been downgraded to 7.2% for FY23, from 7.8% forecasted in the previous meet

It sees 16.2% real GDP growth in Q1FY23, 6.2% in Q2, 4.1% in Q3, and Q4 at 4%. The growth projections assume crude oil at $100 per barrel in the ongoing fiscal.

It announced that the inflation for the current fiscal is now projected at 5.7%, up from 4.5% forecast in the February meet. Q1FY23 inflation is now seen at 6.3%, Q2 at 5%, Q3 at 5.4% and Q4 at 5.1%.

Repo Rate : 4%. 

The reverse repo rate : 3.35%

The Marginal Standing Facility (MSF): 4.25%

The Bank Rate: 4.25%

Cash Reserve Ratio    : 4.00%

Statutory Liquidity Ratio      : 18.00%

                LEARNING FROM HOME/ WOTHOUT CLASSES/ BASICS

The Reserve Bank of India is the supreme monetary and banking authority in the country. It keeps the cash reserve of all scheduled banks and hence is known as Reserve Bank. It was established on April 1, 1935  .

Though originally privately owned, since nationalisation in 1949, the Reserve Bank is fully owned by the Government of India. Its main function includes; formulate, implements and monitors the monetary policy, prescribes broad parameters of banking operations within which the country’s banking and financial system functions, Manages the Foreign Exchange Management Act, 1999, Issues and exchanges or destroys currency and coins not fit for circulation, Banker to the Government: performs merchant banking function for the central and the state governments; also acts as their banker. RBI Governor SHAKTIKANTA DAS

           BANK RATE: It is a rate of interest at which the central bank lends money to the lower bank. It is a quantitative method of credit control.

            REPO RATE:  Also known as repurchased auction. When there is liquidity shortage, government repurchases government securities and payment is made to banks. It adds liquidity to market.It simply means repo rate is the rate at which RBI lends money to commercial banks against the pledge of government securities whenever the banks are in need of funds to meet their day-to-day obligations.

REVERSE REPO RATE: When the government sell dated government securities to banks to suck considerable liquidity in the market. Both repo and reverse repo rates are liquidity Adjustment Ratio (LAR).

Statutory Liquidity Ratio (SLR) is typically defined as the ratio of a bank’s liquid assets to a bank’s net demand and time liabilities (NDTL); refers to the minimum reserve requirement that needs to be maintained by commercial banks in the nation; these assets can be gold, cash, securities that are approved by the Indian government, etc. Apart from these assets, securities that are sanctioned under market stabilization schemes (MSS) as well as market borrowing programmes, and treasury bills are included in the statutory liquidity ratio. It is basically the reserve requirement that banks are expected to keep before offering credit to customers. CRR and SLR have been the traditional tools of the central bank’s monetary policy to control credit growth, flow of liquidity and inflation in the economy.

         INFLATION: It is an economic condition in which prices of goods and services rises and value of money falls or money circulation exceeds the production of goods and services.

         DISINFLATION:  It refers to a situation in which prices are brought down moderately from its higher level without any adverse impact on production and employment.

Cash Reserve Ratio (CRR) is the share of a bank’s total deposit that is mandated by the Reserve Bank of India (RBI) to be maintained with the latter in the form of liquid cash.

The Cash Reserve Ratio acts as one of the reference rates when determining the base rate. Base rate means the minimum lending rate below which a bank is not allowed to lend funds. The base rate is determined by the Reserve Bank of India (RBI).

MONETARY POLICY: Monetary policy is the macroeconomic policy laid down by the central bank. It involves management of money supply and interest rate and is used by the government of a country to achieve macroeconomic objectives like inflation, consumption, growth and liquidity. Monetary policy can be expansionary and contractionary in nature. Increasing money supply and reducing interest rates indicate an expansionary policy. The reverse of this is a contractionary monetary policy.