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A 2 minutes' guide to RBI monetary policy

By Business Standard
April 07, 2017 17:28 IST
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From liquidity, monetary policy operations to financial inclusion, know about RBI monetary policy

  • Liquidity and monetary policy operations
  • Repo rate kept unchanged at 6.25%
  • Policy rate corridor for repo rate reduced from +/- 50 basis points (bps) to +/- 25 bps
  • Reverse repo rate increased by 25 bps to 6% from 5.75%
  • Marginal Standing Facility (MSF) rate reduced by 25 bps to 6.5%
  • RBI to employ a mix of instruments to ensure liquidity
  • Government examining introduction of Standing Deposit Facility (SDF); this would give greater flexibility to manage liquidity operations

Banking regulation and supervision

  • Minimum net owned funds for asset reconstruction companies increased from Rs 2 crore to Rs 100 crore
  • Banks allowed to participate in Real Estate Investment Trust (REITs) and Infrastructure Investment Trust (InvITs)
  • Revised Prompt Corrective Action (PCA) framework for banks to be issued by mid-April 2017

Financial markets

  • Draft guidelines on simplified hedging facility for forex exposure likely by mid-April
  • Towards development of corporate bond market, a draft policy framework for introduction of tri-party repo likely by mid-April

Payment and settlement

  • Eleven additional settlement batches for National Electronic Funds Transfer (NEFT) to be introduced from 8.30 am onwards
  • Total half-hourly settlement batches to increase to 23
  • Current merchant discount rate (MDR) to continue till the issuance of final guidelines
  • Final guidelines for prepaid payment instruments (PPIs) to be issued by end-May

Financial inclusion

  • RBI to initiate a pilot project on financial literacy
  • Project to be commissioned in nine states across 80 blocks by non-government organisations in collaboration with the sponsor banks

Photograph: Reuters

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