4th Bi-Monthly Monetary Policy Review- RBI Repo Rate Cut by 25 Basis Points (Download PDF)

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The Reserve Bank of India (RBI) cuts the repo rate by 25 basis points to 6.25% in its fourth bi-monthly monetary policy review for 2016-17. This was the first decision by newly constituted Monetary Policy Committee (MPC) and under new RBI Governor Urjit Patel.

  • This decision was taken unanimously by MPC’s all the six members- the intent is to achieve a midterm inflation target of 4% within a band of plus or minus 2%.

Policy Rates

  • Repo rate under the liquidity adjustment facility (LAF): Reduced by 0.25 basis points to 6.25%.
  • Reverse repo rate under the LAF: Adjusted to 5.75%.
  • Marginal standing facility (MSF) and Bank Rate: Adjusted to 6.75%.
  • Reserve Ratios Cash Reserve Ratio (CRR) of scheduled banks: Unchanged at 4.0 % of net demand and time liability (NDTL).
  • Statutory Liquidity Ratio (SLR):20.75%.

About Monetary Policy Committee (MPC)

  • Includes six members, three Reserve Bank of India (RBI) representatives and three external delegates.
  • Entrusted with the task of fixing the benchmark policy rate (Repo rate).
  • Key objective is to contain inflation within the specified target level.
  • Monetary Policy Committee members appointed by the Central Government hold office for four years with immediate effect or until further orders MPC meeting will be held at least 4 times in a year.
  • After each meeting, it will publish its minutes.
  • It was setup under the amendment to Reserve Bank of India Act, 1934.
  • It will redistribute or dilute the power the RBI governor while deciding interest rates.
  • RBI’s interest rates will now be decided based on the majority view of MPC’s six-member committee, and only in the case of a tie, the Governor will cast a vote. Previously interest rate was decided by RBI Governor and Technical Advisory Committee (TAC) which will be succeeded by MPC.

Specific Functions of MPC

  • MPC will now decide the interest rates to meet the inflation target under the new inflation-targeting regime.
  • Monetary Policy Committee will meet four times a year to make decisions.

- Published/Last Modified on: October 6, 2016

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