Podcast
Questions and Answers
What was the decision made by Prof Jayanth R Varma regarding the policy repo rate?
What was the decision made by Prof Jayanth R Varma regarding the policy repo rate?
- Increased the rate by 25 basis points
- Reduced the rate by 50 basis points
- Reduced the rate by 25 basis points (correct)
- Kept the rate unchanged
What is the scheduled date for the next MPC meeting?
What is the scheduled date for the next MPC meeting?
- May 10, 2024
- April 19, 2024
- June 5 to 7, 2024 (correct)
- July 1, 2024
What is the current repo rate as mentioned in the content?
What is the current repo rate as mentioned in the content?
- 7.00%
- 6.25%
- 6.75%
- 6.50% (correct)
What is the inflation target established within the provided band?
What is the inflation target established within the provided band?
How many total MPC meetings are scheduled for the fiscal year 2024-25?
How many total MPC meetings are scheduled for the fiscal year 2024-25?
What is the projected real GDP growth rate for 2024-25?
What is the projected real GDP growth rate for 2024-25?
What was the stance taken by Dr. Shashanka Bhide regarding the repo rate?
What was the stance taken by Dr. Shashanka Bhide regarding the repo rate?
What is the SDF rate as outlined in the detail section?
What is the SDF rate as outlined in the detail section?
What is the primary purpose of the MSS monetary policy tool?
What is the primary purpose of the MSS monetary policy tool?
What is the limit under the MSS?
What is the limit under the MSS?
When was the MSS initiated?
When was the MSS initiated?
How many members compose the Monetary Policy Committee (MPC)?
How many members compose the Monetary Policy Committee (MPC)?
Who appoints the members of the MPC that are not from the RBI?
Who appoints the members of the MPC that are not from the RBI?
What is the term duration for members of the MPC appointed by the Central Government?
What is the term duration for members of the MPC appointed by the Central Government?
Which section of the RBI Act pertains to the establishment of the MPC?
Which section of the RBI Act pertains to the establishment of the MPC?
What type of securities does the RBI sell under the MSS?
What type of securities does the RBI sell under the MSS?
What does durable liquidity encompass in terms of capital flows?
What does durable liquidity encompass in terms of capital flows?
Which of the following is classified as a direct tool in monetary policy?
Which of the following is classified as a direct tool in monetary policy?
What is the main purpose of the Monetary Policy Committee (MPC) as established by the RBI Act?
What is the main purpose of the Monetary Policy Committee (MPC) as established by the RBI Act?
Which term is often used to describe foreign portfolio investment due to its transient nature?
Which term is often used to describe foreign portfolio investment due to its transient nature?
What legislative act permits the formation of the Monetary Policy Committee?
What legislative act permits the formation of the Monetary Policy Committee?
What is the primary role of the Reserve Bank of India (RBI) regarding refinancing for banks?
What is the primary role of the Reserve Bank of India (RBI) regarding refinancing for banks?
What amount has the RBI announced for special refinance facilities to All-India Financial Institutions?
What amount has the RBI announced for special refinance facilities to All-India Financial Institutions?
What is one of the criteria for Regional Rural Banks (RRBs) to avail Liquidity Adjustment Facility (LAF)?
What is one of the criteria for Regional Rural Banks (RRBs) to avail Liquidity Adjustment Facility (LAF)?
Which of the following is NOT a component of the Liquidity Adjustment Facility (LAF)?
Which of the following is NOT a component of the Liquidity Adjustment Facility (LAF)?
Which institution is primarily responsible for controlling the money flow in the economy through rates?
Which institution is primarily responsible for controlling the money flow in the economy through rates?
What is the minimum Capital to Risk-weighted Assets Ratio (CRAR) required for Scheduled RRBs to qualify for LAF and MSF?
What is the minimum Capital to Risk-weighted Assets Ratio (CRAR) required for Scheduled RRBs to qualify for LAF and MSF?
Which of the following All-India Financial Institutions is NOT mentioned in the document regarding refinance facilities?
Which of the following All-India Financial Institutions is NOT mentioned in the document regarding refinance facilities?
What does the Repo Rate in the LAF refer to?
What does the Repo Rate in the LAF refer to?
What is the main purpose of the Marginal Standing Facility (MSF) for banks?
What is the main purpose of the Marginal Standing Facility (MSF) for banks?
Which financial entity is responsible for ensuring compliance with terms while availing LAF and MSF?
Which financial entity is responsible for ensuring compliance with terms while availing LAF and MSF?
What is the marginal standing facility rate primarily used for?
What is the marginal standing facility rate primarily used for?
What is the minimum amount a commercial bank must borrow under the marginal standing facility?
What is the minimum amount a commercial bank must borrow under the marginal standing facility?
Which action does Open Market Operation (OMO) involve to manage liquidity?
Which action does Open Market Operation (OMO) involve to manage liquidity?
What happens when the Reserve Bank of India sells government securities?
What happens when the Reserve Bank of India sells government securities?
What is the primary purpose of the Market Stabilization Scheme (MSS)?
What is the primary purpose of the Market Stabilization Scheme (MSS)?
How does the Reserve Bank of India inject liquidity into the market through OMO?
How does the Reserve Bank of India inject liquidity into the market through OMO?
What is the maximum borrowing limit for a commercial bank under the marginal standing facility?
What is the maximum borrowing limit for a commercial bank under the marginal standing facility?
When was the Market Stabilization Scheme (MSS) introduced?
When was the Market Stabilization Scheme (MSS) introduced?
What is a potential effect of a central bank conducting open market operations?
What is a potential effect of a central bank conducting open market operations?
What is the term for the rate used by commercial banks to borrow from RBI for overnight loans?
What is the term for the rate used by commercial banks to borrow from RBI for overnight loans?
Study Notes
Monetary Policy Developments
- Prof. Jayanth R Varma advocated for a reduction in the policy repo rate by 25 basis points.
- Dr. Shashanka Bhide, Dr. Ashima Goyal, Dr. Rajiv Ranjan, Dr. Michael Debabrata Patra, and Dr. Shakti Kanta Das voted to maintain the repo rate at 6.50%.
- The Monetary Policy Committee (MPC) meeting minutes were published on April 19, 2024, with the next meeting scheduled for June 5 to 7, 2024.
Economic Projections
- Fiscal Year 2024-25 includes six MPC meetings.
- Repo Rate is currently set at 6.50%, with SDF Rate at 6.25% and MSF Rate at 6.75%.
- Real GDP growth is projected at 7.0%, while CPI inflation is projected at 4.5%.
- The inflation target for the RBI is set at 4%, allowed within a band of +/- 2%.
Reserve Bank of India (RBI) Initiatives
- RBI announced Rs 50,000 crore special refinance facilities for All-India Financial Institutions (AIFIs) including NABARD, SIDBI, and NHB.
- The introduction of Liquidity Adjustment Facility (LAF) and Marginal Standing Facility (MSF) for Regional Rural Banks (RRBs) aims to manage liquidity better.
Liquidity Management Tools
-
Liquidity Adjustment Facility (LAF):
- Comprises two components: Repo Rate and Reverse Repo Rate, controlling money flow in the economy.
-
Marginal Standing Facility (MSF):
- Rate at which commercial banks borrow from RBI overnight, with a minimum of Rs 1 crore and a maximum of 2% of NDTL.
-
Open Market Operations (OMO):
- Conducted by RBI to adjust money supply through sale or purchase of Government Securities (G-SECS).
-
Market Stabilization Scheme (MSS):
- Introduced in 2004, aimed at withdrawing excess liquidity by selling government securities, with a limit of Rs 600,000 crore.
Monetary Policy Committee (MPC) Structure
- Section 45ZB of the amended RBI Act, 1934 established an empowered six-member MPC appointed by the Central Government.
- The first MPC was constituted on September 29, 2016.
- Three members are from RBI, while the Central Government appoints three members who serve a four-year term.
Monetary Policy Tools
-
Direct Tools:
- Cash Reserve Ratio (CRR)
- Statutory Liquidity Ratio (SLR)
- Refinancing Facility
-
Indirect Tools:
- Liquidity Adjustment Facility (LAF)
- Bank Rate
- Marginal Standing Facility (MSF)
- Open Market Operations (OMO)
- Market Stabilization Scheme (MSS)
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Description
Explore the latest developments in India's monetary policy as discussed in the Monetary Policy Committee meeting. This quiz delves into the repo rate decisions, economic projections, and key initiatives by the Reserve Bank of India for the fiscal year 2024-25.
