RBI Fifth Bi-Monthly Policy 2018-19


RBI Fifth Bi-Monthly Policy 2018-19

RBI Fifth Bi-Monthly Policy 2018-19

Reserve Bank of India (RBI) has announced its fifth Bi-Monthly Monetary Policy Rates for 2018-19 in Mumbai today. 
The fifth Bi-monthly policy has been released based on the assessment of the Monetary Policy Committee of the Reserve Bank of India (RBI). Monetary Policy Rates are crucial for the exam, especially Banking awareness.
  • RBI maintained calibrated tightening stance and projected HIFY20 GDP growth at 7.5 per cent.
  • RBI to cut SLR by 25 bps to align it to LCR requirement.
The Reserve Bank of India in its fifth Bi-Monthly statement 2018-19 has made the following announcements -
  • Keep the policy repo rate under the liquidity adjustment facility (LAF) unchanged at 6.5 per cent.
  • Consequently, the reverse repo rate under the LAF remains at 6.25 per cent, and
  • The marginal standing facility (MSF) rate and the Bank Rate at 6.75 per cent
  • The decision of the MPC is consistent with the stance of calibrated tightening of monetary policy in consonance.
  • Cash Reserve Ratio (CRR) remains unchanged at 4%.
  • The objective of achieving the medium-term target for consumer price index (CPI) inflation of 4 percent within a band of +/- 2 per cent, while supporting growth
Current Policy Rates:
Policy Repo Rate 6.50 %
Reverse Repo Rate 6.25 %
Marginal Standing Facility Rate 6.75 %
Bank Rate 6.75 %

Reserve Ratios:

CRR 4 %
SLR 19.25% (earlier -19.5%)

The remaining policy statements would be released by RBI as stated below - 

Policy Statement Dates of Release
First Bi-monthly Monetary Policy Statement for 2018-19 5th April 2018
Second Bi-monthly Monetary Policy Statement for 2018-19 6th June 2018
Third Bi-monthly Monetary Policy Statement for 2018-19 1st August 2018
Fourth Bi-monthly Monetary Policy Statement for 2018-19 5th October 2018
Sixth Bi-monthly Monetary Policy Statement for 2018-19 6th Feb 2019

Let us now understand some common terms of the Policy rates - 

Repo Rate 

It is the rate at which RBI lends money to commercial banks.

Reverse Repo rate

It is the rate at which RBI borrows money from commercial banks.

Cash Reserve Ratio (CRR)

The share of net demand and time liabilities (deposits) that banks must maintain a cash balance with the Reserve Bank.

Statutory Liquidity Ratio (SLR)

The share of net demand and time liabilities (deposits) that banks must maintain in safe and liquid assets, such as, government securities, cash, and gold.

Bank Rate

It is the rate at which the Reserve Bank is ready to buy or rediscount bills of exchange or other commercial papers for the long term.

Marginal Standing Facility Rate (MSF)

The rate at which the scheduled banks can borrow funds from the RBI overnight, against the approved government securities is termed as MSF.

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