Reference :

• The Monetary Policy Committee ( MPC) of the Reserve Bank of India ( RBI) has kept the repo rate unchanged at 6.5% for the financial year 2024-25 ( FY 25) .

key points: 

Key highlights set by the Monetary Policy Committee 2024 Rates :

important facts

• MPC) constituted by the Central Government under section 45ZB determines the policy interest rate necessary to achieve the inflation target.
• Under Section 45ZB of the RBI Act , 1934, as amended , the Central Government is empowered to constitute a six-member Monetary Policy Committee ( MPC) to determine the policy interest rate necessary to achieve the inflation target.
• The first MPC was constituted on 29 September 2016 .
• The current mandate of the Committee is to maintain the Consumer Price Index ( CPI) inflation rate at 4% (+/- 2%) annually and is accountable to the Government of India if inflation exceeds the prescribed limit for three consecutive quarters.

Tools of Monetary Policy:

• Liquidity Adjustment Facility ( LAF) : Allows banks to borrow money through repurchase agreements (repos) or lend money to the RBI through reverse repo agreements.
• Repo Rate: RBI lends money to banks to meet their short-term financing needs.
• Reverse Repo Rate: The interest rate at which the Reserve Bank absorbs liquidity from banks against the collateral of eligible government securities under the LAF .
• Standing Deposit Facility ( SDF) Rate: The rate at which the Reserve Bank accepts unsecured deposits on an overnight basis from all LAF participants.
• Marginal Standing Facility ( MSF) Rate: The penal rate at which banks can borrow overnight from the Reserve Bank by cutting their Statutory Liquidity Ratio ( SLR) portfolio up to a predetermined limit (2 per cent). It provides a safety valve to the banking system against unexpected liquidity shocks.
• Bank Rate: Bank rate acts as a penal rate levied on banks for shortfall in meeting their reserve requirements (cash reserve ratio and statutory liquidity ratio).
• Cash Reserve Ratio ( CRR): CRR is a percentage of total deposits that banks have to maintain as liquid cash with the RBI .
• Open Market Operations ( OMO): It involves outright purchase/sale of government securities by the RBI for injection/absorption of durable liquidity into the banking system.
• Statutory Liquidity Ratio ( SLR): It is the minimum percentage of deposits that a commercial bank has to maintain in the form of liquid cash , gold or other securities.

Monetary Policy Committee structure of : 

• The committee consists of six members: The RBI Governor is the Chairman (ex-officio) of the Committee comprising three RBI officials and three external members nominated by the Government of India .

Reserve Bank of India ( RBI):

• Established: April 1 , 1935 ( as per the provisions of the Reserve Bank of India Act , 1934)
• Headquarters : Mumbai
• Nationalisation : 1 January 1949
• Current Governor: Shaktikanta Das