MPC Statement
The Monetary Policy Committee (MPC) on its third Bimonthly Monetary Policy of FY 2017-18 reduced the policy repo rate under the liquidity adjustment facility (LAF) by 25 basis points from 6.25 per cent to 6.0 per cent with immediate effect.
Consequently, the reverse repo rate under the LAF stands adjusted to 5.75 per cent, and the marginal standing facility (MSF) rate and the Bank Rate to 6.25 per cent.
| Rates | New | Earlier |
|---|---|---|
| Repo Rate | 6.00% | 6.25% |
| Reverse Repo Rate | 5.75% | 6.00% |
| Marginal Standing Facility Rate (MSFR) | 6.25% | 6.50% |
| Bank Rate | 6.25% | 6.50% |
| Cash Reserve Ratio (CRR) | 4.00% | Unchanged (9th February 2013) |
| Statutory Liquidity Ratio (SLR) | 20.00% | Unchanged (7th June 2017) |
Effects:
Banks: Repo Rate Decreases= Banks get cheaper loans from RBI= Individuals gets cheap loans= More money in the Market= Inflation Triggers (As required)
Individuals: Loans from Banks= Gets Cheaper= public will borrow more= more money in the market
Overall: Slashing of the policy rates by RBI is needed as the economy was suppressing and in order to line up the economy, RBI trimmed the rates so that more money will flow in the Economy. The next meeting of the MPC is scheduled on October 3 and 4, 2017.
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MAHENDRA GURU