RBI Governor Shaktikanta Das declared today that the MPC has decided to keep its accommodative posture while keeping the repo rate, reverse repo rate, bank rate, and marginal standing facility (MSF) rate constant.
The MPC also decided to leave the marginal standing facility (MSF) at 4.25 percent unchanged. , the reverse repo rate maintained at 3.35 percent. The MPC chose to retain an accommodative posture with a 5:1 majority in order to encourage economic growth and recovery.
What is Repo Rate ?
In the event of a cash shortage, the central bank of a country (in India, the Reserve Bank of India) loans money to commercial banks at a repo rate. Monetary authorities use the repo rate to keep inflation in check.
What is Reverse Repo Rate ?
The rate at which a country’s central bank pays its commercial banks to store their excess cash in the central bank is known as the reverse repo rate. The central bank in India, the RBI uses a monetary policy called reverse repo rate to control the flow of money in the market. When a country’s central bank needs money, it borrows it from commercial banks and pays interest at the reverse repo rate.
What is Marginal Standing Facility?
In an emergency, when interbank liquidity is fully depleted, banks can borrow from the Reserve Bank of India using the marginal standing facility (MSF).
Top Announcement from RBI
- The repo rate, reverse repo rate, and MSF rate have all stayed steady.
- MPC will maintain its pro-growth position until there are signs of a long-term recovery.
- Retail inflation has been set at 4.5 percent for FY23, with the RBI maintaining its 5.3 percent inflation forecast for FY22.
- For FY23, real GDP growth is expected to be 7.8%.
- The major liquidity management instrument will be 14-day tenor variable-rate repo and variable-rate reverse repo auctions.
- On the subject of growth, RBI Governor Das stated that the central bank now expects 7.8% growth in FY23.
- It also forecasts 17.2 percent increase in Q1FY23, 7% growth in Q2, 4.3 percent growth in Q3, and 4.5 percent growth in Q4.
- In terms of inflation, the RBI has kept its CPI inflation projection for FY22 at 5.3 percent.
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