Reserve Bank of India’s(RBI) monetary policy review

News: The Reserve Bank of India has released its monetary policy committee (MPC) report.

Facts:

Key Highlights:

  • Repo Rate:It is the rate at which the RBI lends money to the banks for a short term.It remains unchanged at 4%.
  • Reverse Repo Rate:It is the short term borrowing rate at which RBI borrows money from banks.It remains unchanged at 3.35%
  • Marginal Standing facility: It is a window for banks to borrow from the Reserve Bank of India in an emergency situation when interbank liquidity dries up completely.It has remained unchanged at 4.25%.
  • Additional credit support for housing and rural sectors: RBI will provide additional special liquidity facility of Rs 10,000 crore to NABARD & NHB to improve fund availability.
  • Priority Sector Lending(PSL): RBI has brought startups under the purview of priority sector lending(PSL).It has also increased borrowing limits of the renewable energy sector.
  • Innovation Hub: RBI will set up an Innovation Hub to further promote and facilitate an environment that can accelerate innovation across the financial sector.
  • KV Kamath Committee: RBI has set up a committee under KV Kamath, to make recommendations on the required financial parameters along with the sector-specific benchmark ranges for one time restructuring of loans.

Additional Facts:

  • Monetary Policy Committee(MPC): It is a committee of the Reserve Bank of India which consists of six members with three nominated by the Union government and three representing the RBI.
  • It is mandated by law to ensure that retail inflation stays within a band of two percentage points of the target inflation rate of 4%.
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