REPO RATE

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• The Reserve Bank of India’s Monetary Policy Committee (MPC) has increased the policy Repo Rate by 40 basis points to 4.40%, with immediate effect and Cash Reserve Ratio (CRR) of banks by 50 basis points to 4.5% of Net Demand and Time Liabilities (NDTL).
• This is the first increase in the policy repo rate by RBI since May 2020.

Monetary Policy Committee

• It is a statutory and institutionalized framework under the Reserve Bank of India Act, 1934, for maintaining price stability, while keeping in mind the objective of growth.
• The Governor of RBI is ex-officio Chairman of the committee.
• The MPC determines the policy interest rate (repo rate) required to achieve the inflation target (4%).
• An RBI-appointed committee led by the then deputy governor Urjit Patel in 2014 recommended the establishment of the Monetary Policy Committee.

Rates Now

Policy Repo Rate: 4.40%

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. Here, the central bank purchases the security.

Standing Deposit Facility (SDF): 4.15%

• The SDF is a liquidity window through which the RBI will give banks an option to park excess liquidity with it.
• It is different from the reverse repo facility in that it does not require banks to provide collateral while parking funds.

Marginal Standing Facility Rate: 4.65%

• MSF is a window for scheduled banks to borrow overnight from the RBI in an emergency situation when interbank liquidity dries up completely.
• Under interbank lending, banks lend funds to one another for a specified term.

Bank Rate: 4.65%

• It is the rate charged by the RBI for lending funds to commercial banks.
• CRR: 4.50% (Effective from 21st May, 2022)
• Under CRR, the commercial banks have to hold a certain minimum amount of deposit (NDTL) as reserves with the central bank.

SLR: 18.00%

• Statutory Liquidity Ratio or SLR is the minimum percentage of deposits that a commercial bank has to maintain in the form of liquid cash, gold or other securities.
• The decision has been taken in view of the global scenario, wherein there has been a sharp rise in inflation due to current geopolitical tensions.
• Inflation has risen to its highest level in the last 3-4 decades in major economies with global crude oil prices remaining volatile and above USD 100 per barrel.
• The hike in Repo rate and CRR is aimed at reining in elevated inflation amid the global turbulence in the wake of the Ukraine war.
• The RBI aimed to keep inflation – which is already close to 7% — at its desired level and control and monitor money flow into the banking system.
• There has also been a spike in fertiliser prices and other input costs, which has a direct impact on food prices in India.

SOURCE: THE HINDU,THE ECONOMIC TIMES,MINT