RBI’s Bi Monthly Policy for Investors and Borrowers 2019-20 – PDF

RBI’s Bi Monthly Policy for Investors and Borrowers, Every year Reserve Bank of India releases six bi-monthly policy statements. The purpose of these statements is to review and adjust monetary and liquidity measures every two months. This help the central bank keep inflation under control and steer economy toward projected growth. The central bank observed the decline in borrowing interest rates and direct benefits reaped by customers.

RBI in its monetary policy review introduced Marginal Cost Lending Rate (MCLR) of funds to advance the policy diffusion in the economy. This was done in conjunction to borrowing rate cuts by the Government. now check more details about “RBI’s Bi Monthly Policy for Investors and Borrowers” from below…..

RBI’s Bi Monthly Policy for Investors and Borrowers

Reserve Bank of India (RBI) has announced its first Bi-Monthly Monetary Policy Rates for 2019-20 in Mumbai today.  The Reserve Bank of India on Thursday cut repo rate by 25 basis points for the second straight time. The central bank kept monetary policy stance at ‘neutral’.

First 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.

The three-day policy review meeting by the Monetary Policy Committee(MPC) headed by RBI Governor Shaktikanta Das in Mumbai.

The Reserve Bank of India in its first Bi-Monthly statement 2019-20 has made the following announcements –

  • The RBI reduced the policy repo rate under the liquidity adjustment facility (LAF) by 25 basis points to 6.0 per cent from 6.25 per cent with immediate effect.
  • Consequently, the reverse repo rate under the LAF stands adjusted to 5.75 per cent.
  • The marginal standing facility (MSF) rate and the Bank Rate to 6.25 per cent
  • The MPC also decided to maintain the neutral monetary policy stance.
  • These decisions are in consonance with the objective of achieving the medium-term target for consumer price index (CPI) inflation of 4 per cent within a band of +/- 2 per cent, while supporting growth.

Current Policy Rates:

Policy Repo Rate6.0%
Reverse Repo Rate5.75 %
Marginal Standing Facility Rate6.25%
Bank Rate6.25%

Reserve Ratios:

CRR4 %
SLR19.25%

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

Policy StatementDates of Release
Second Bi-monthly Monetary Policy Statement for 2019-206th June 2019
Third Bi-monthly Monetary Policy Statement for 2019-207th August 2019
Fourth Bi-monthly Monetary Policy Statement for 2019-204th October 2019
Fifth Bi-monthly Monetary Policy Statement for 2019-205th December 2019
Sixth Bi-monthly Monetary Policy Statement for 2019-206th Feb 2020

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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