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The bank’s six-member monetary policy committee voted 5-1 to retain an accommodative posture in order to promote and sustain Asia’s third-largest economy’s fledgling growth recovery.
The benchmark repo rate remained constant at 4%, and the reverse repo rate remained at 3.35 percent. The governor of the central bank stated that the panel expected inflation to continue within the goal range of 6% as the highest limit.”The MPC also resolved to maintain the accommodative posture for as long as it is necessary to recover and sustain growth on a long-term basis and continue to offset the impact of COVID-19 on the economy,” according to the bank’s most recent monetary policy resolution.The repo rate is the rate at which commercial banks borrow money from the Reserve Bank by selling their assets, whereas the reverse repo rate is the rate at which the central bank borrows money.As India drives its embryonic economic recovery following the pandemic, these loan rates are critical to encouraging credit and investments by businesses in the sector.
“We don’t want to disturb the boat when the coast is close because there’s a journey ahead,” Das explained. “Losing patience is losing the battle.”On the back of record foodgrain output, food inflation is projected to remain low in the following month, according to the RBI Governor.
To soften the impact of the epidemic, the RBI has decreased the repo rate by 115 basis points (bps) since March 2020. Since the start of 2019, the Fed has lowered rates by 135 basis points.
The six-member monetary policy committee was likely to keep the repurchase rate at 4%, according to a widely monitored prediction by 30 analysts for Bloomberg on Wednesday.
Monetary policy committee
The committee consists of six members: three Reserve Bank of India staff and three external members appointed by the Indian government. For “utmost confidentiality,” they must maintain a “quiet period” of seven days before and after the rate determination. The committee is chaired ex officio by the Governor of the Reserve Bank of India. A majority vote is required, with the Governor holding the casting vote in the event of a tie. The committee’s current mandate is to keep annual inflation at 4% through March 31, 2021, with a maximum tolerance of 6% and a minimum tolerance of 2%.
The Reserve Bank of India Act, 1934 was revised by the Finance Act (India), 2016, to create the Monetary Policy Committee (MPC), which will bring more openness and accountability to the process of determining India’s monetary policy. After each meeting, the monetary policy is published, with each member explaining his or her position. If inflation exceeds the allowed range for three consecutive quarters, the committee must report to the Indian government.
Composition of monetary policy
The current monetary policy committee is comprised of the following individuals:
Shaktikanta Das, ex officio Governor of the Reserve Bank of India
Michael Debrata Patra is the Bank’s Deputy Governor in charge of monetary policy.
M K Saggar, the Bank’s Executive Director in Charge of Monetary Policy
Prime Minister Narendra Modi’s economic advisory council has Ashima Goyal as a member. Ms. Goyal is a visiting fellow at Yale University and a professor at Mumbai’s Indira Gandhi Institute of Development Research.
Shashanka Bhide is a senior advisor of the National Council for Applied Economic Research, a think tank situated in New Delhi that does agricultural, poverty analysis, and macroeconomic research.
At the Indian Institute of Management in Ahmedabad, Jayanth Varma teaches finance and accounting. He formerly served on the board of the regulator of the country’s capital markets.
Members 4–6 will serve for four years from the date of their appointment, while the other three will serve in an official capacity. None of the nominees from the federal government are eligible for reappointment.
Conclusion
The six-member Monetary Policy Committee of the Reserve Bank of India voted to keep the benchmark repurchase rate at 4%.The bank’s six-member monetary policy committee voted 5-1 to retain an accommodative posture in order to promote and sustain Asia’s third-largest economy’s fledgling growth recovery. The MPC also resolved to maintain the accommodative posture for as long as it is necessary to recover and sustain growth on a long-term basis and continue to offset the impact of COVID-19 on the economy,” according to the bank’s most recent monetary policy resolution.
As India drives its embryonic economic recovery following the pandemic, these loan rates are critical to encouraging credit and investments by businesses in the sector.
The committee consists of six members: three Reserve Bank of India staff and three external members appointed by the Indian government. For “utmost confidentiality,” they must maintain a “quiet period” of seven days before and after the rate determination.
The Reserve Bank of India Act, 1934 was revised by the Finance Act (India), 2016, to create the Monetary Policy Committee (MPC), which will bring more openness and accountability to the process of determining India’s monetary policy.
Members 4–6 will serve for four years from the date of their appointment, while the other three will serve in an official capacity. None of the nominees from the federal government are eligible for reappointment.
