The monetary policy of the Reserve Bank of India (RBI) will come on Thursday (February 10). RBI’s Monetary Policy Committee (MPC) meeting has started on Wednesday (January 8). After the three-day meeting, its results will come on February 10. The RBI governor will announce its results on Thursday. Let us know the answer to every question you have about this monetary policy here.
What can happen in monetary policy this time?
RBI’s Monetary Policy Committee can announce a change in its stand this time. It may announce to make its accommodative stance (liberal stance) neutral on monetary policy. Some analysts say that the MPC may hike the reverse repo rate.
What is reverse repo rate?
Reverse repo rate is the rate at which interest is earned on the money deposited by the banks with the RBI. This interest is given by RBI. Actually, when there is more fund, banks deposit their extra money with RBI, on which RBI gives interest to them. At present the reverse repo rate is 3.35 per cent.
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What will happen if RBI increases reverse repo rate?
There is not going to be much effect of increasing the reverse repo rate. Yes, this would be an indication that the RBI is now going to normalize its monetary policy. Madan Sabnavis, Chief Economist, Bank of Baroda, said, “The increase in reverse repo means that it is the first step towards normalizing the policy. This will make the market believe that the rate hike has started. This will increase the yield. can be seen.”
What does the increase in reverse repo mean for the market?
Analysts say the move is mostly indicative. In fact, the RBI is already reducing the excess liquidity in the system through Variable Rate Reverse Repo (VRRR). This has brought the effective rate close to the repo rate. The financial markets have already digested the hike in the reverse repo rate.
What do the ‘accomodative’ and ‘neutral’ stances mean?
Accommodative stance means that the RBI is going to reduce the policy rate in the near future. This is done to increase liquidity in the banking system. Generally, when the stance of MPC is favorable, the policy rate is not expected to increase.
Neutral stance means that the MPC can increase or decrease the policy rate as per the situation. For the last two years, RBI’s MPC has adopted a conservative stance. Its purpose was to help the economy, which was hit by Corona.
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