Venkatesh Chaturvedi is teaching live on Unacademy Plus
Economic Survey of India - V2 Chapter 3: Monetary Management and Financial Intermediation Lesson 1 J)resented, Venkatesh Chaturvedi
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Backdrop During 2017-18 (till January), monetary policy remained steady with only one policy rate cut in August .Y-o-Y effect of demonetisation wore off bank credit growth remains subdued ecosystem for the new insolvency and bankruptcy process took shape stock markets also hit record highs this financial year
Terminologies Bank Rate: It is the rate at which RBI makes loans to commercial banks with collateral Repo Rate: rate at which the central bank of a country (Reserve Bank of India in case of India) lends money to commercial banks in the event of any shortfall of funds Reverse Repo Rate: rate at which RBI borrows money from the commercial banks. Cash Reserve Ratio: It is a specified minimum fraction of the total deposits of customers, which commercial banks have to hold as reserves either in cash or as deposits with the central bank. CRR is set according to the guidelines of the central bank of a country. Statutory Liquidity Ratio: It is the reserve requirement that the commercial banks in India are required to maintain in the form of cash, gold, government approved securities before providing credit to the customers.
Monetary Policy Committee entrusted with the task of fixing the benchmark policy rate (repo rate) required to contain inflation within the specified target level meetings of the Monetary Policy Committee are held at least 4 times a year Inflation targets: Inflation Target: Four per cent .Upper tolerance level Six per cent Lower tolerance level: Two per cent 6 member committee three Members will be from the RBI and the other three Members of MPC will be appointed by the Central Government
Table 1 Effective Date Bank rate/MSF Rate (Percent) (per cent) Rate (per cent) (per cent of NDTL) (per cent of NDTL) Repo Rate Reverse Repo Cash Reserve Ratio Statutory Liquidity Ratio 05/04/16 09/08/16 04/10/16 08/02/17 06/04/17 07/06/17 02/08/17 14/08/17 04/10/17 06/12/17 21.25 21 20.75 20.5 20.5 4 6.5 5.75 5.75 6.75 6.25 4 4 4 6.75 6.25 5.75 5.75 5.75 5.75 20 19.5 19.5 19.5 4 6.25 4