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RBI monetary Policy highlights-CSEET/Cscexecutive

The Reserve Bank of india was established as the central Bank of India to regulate the issue of bank notes and to keep reserves to secure monetary stability. The Reserve Banke operate fal currency and credit system. It also formulates the modern monetary policy tramework to face the challenges of growing economy.

The chief aim of monetary policy is to maintain price stabiliti while keeping in mind the objective of growth.

After 3 days of detailed deleberations the monetary Policy committee (MPC) announced the monetary policy though RBI Governor Shakti Kantha Dason 9th October.

Key high lights of the policy are as follows.

1. There is no ecouse in Repo rate and it is maintained at 4%. Reporate is the fixed interest rate charged by RBI for providing overnight liquidity against collateral of government and other approved securities.

2. The reverse repo rate stands unchanged at 3.35%. Reverse Repo rate is the interest rate at which RBI absorbs liquidity from banks against the collateral of eligible government securities under Liquidity adjustmeat facility.

3. Marginal Standing Facility rate and bank rati remain unchanged. Marginal standing facility rate is the at which scheduled commercial banks can borrow additional amount from RBI against their excess SLR securities and also by dipping into their SLR portfolio to a limit at a penal interest rate.

Bank rate is the rate at which RBI is ready to buy or rediscount bills or other commercial papers.

4. Global economy is rebounding as a whole but unevenly among economies.

5. Rural economy looks strong and lodes that food grains produckon is set to cross records.

6. MPC projections indicate that indlation would ease.

7. Purchasing Manager's Index (PMI) of manufacturing for September 2020 increased to 56.8, highest since Jan, 2012 as new orders and production accelerated.

8. services PMI for September risen to 49.8 from 41.8.

9. GDP for 2020-21 is expected to decline by 9.5%. But a rebound is possible.

10. weighted average cost of borrowings by the central government at 5.82% was the lowest in the last 16 years.

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