RBI LEAVES POLICY RATES UNCHANGE
Repo rate unchanged at 6.50 per cent
Reverse Repo at 6%
Cash reserve ratio or CRR unchanged at 4%
Growth forecast at 7.6% for the current fiscal
Inflation target remains 5% for January 2017; upside risk
Normal monsoon, 7th Pay Commission award to boost growth
GST roll out to boost business sentiment, investment
Timely implementation of GST a challenge
Forex reserves at USD 365.7 billion on August 5
FACTS AND FIGURES
The Reserve Bank of India is the supreme monetary and banking authority in the country. It keeps the cash reserve of all scheduled banks and hence is known as Reserve Bank. It was established on April 1, 1935. Though originally privately owned, since nationalisation in 1949, the Reserve Bank is fully owned by the Government of India. Its main function includes; formulate, implements and monitors the monetary policy, prescribes broad parameters of banking operations within which the country’s banking and financial system functions, Manages the Foreign Exchange Management Act, 1999, Issues and exchanges or destroys currency and coins not fit for circulation, Banker to the Government: performs merchant banking function for the central and the state governments; also acts as their banker. RBI Governor Raghuram Rajan
MONETARY POLICY: Monetary policy is the macroeconomic policy laid down by the central bank. It involves management of money supply and interest rate and is used by the government of a country to achieve macroeconomic objectives like inflation, consumption, growth and liquidity. Monetary policy can be expansionary and contractionary in nature. Increasing money supply and reducing interest rates indicate an expansionary policy. The reverse of this is a contractionary monetary policy.
BANK RATE: it is a rate of interest at which the central bank lends money to the lower bank. It is a quantitative method of credit control.
REPO RATE: also known as repurchased auction. When there is liquidity shortage, government repurchases government securities and payment is made to banks. It adds liquidity to market.
REVERSE REPO RATE: When the government sells dated government securities to banks to suck considerable liquidity in the market. Both repo and reverse repo rates are liquidity Adjustment Ratio (LAR).