Repo rate kept unchanged at 6.5%

Reserve Bank of India (RBI) in its fifth bimonthly monetary policy review for financial year 2018-19 has decided to maintain status quo in policy rates by keeping repo rate unchanged at 6.5%.

The reverse repo rate has also been maintained at 6.25%.
This decision was taken by RBI's six member Monetary Policy Committee (MPC) headed by RBI Governor Urjit Patel.

Details:

The decision of MPC is consistent with its stance of calibrated tightening of monetary policy in consonance with the objective of achieving medium-term target for consumer price index (CPI) inflation of 4% within band of +/- 2 per cent, while supporting growth.
It has projected that retail inflation projection lowered in the range of 2.7-3.2% for the 2nd half of 2018-19; 3.8-4.2% in the first half of 2019-20.
It has forecasted GDP growth for 2018-19 at 7.4% and 7.5% for the first half of 2019-20.

About Policy Rates:

Repo rate:

It was unchanged at 6.5%.
It is the rate at which the RBI lends to its clients generally against government securities.

Reverse Repo Rate:

It was unchanged at 6.25%.
It is the rate at which banks lend funds to the RBI.

Marginal Standing Facility (MSF) Rate:

It was unchanged at 6.75%.
It is the rate at which scheduled banks can borrow funds overnight from the RBI against government securities.
It is a very short term borrowing scheme for scheduled banks.

Bank Rate:

It was unchanged at 6.75%.
It is the rate charged by the central bank for lending funds to commercial banks.
Higher bank rate will translate to higher lending rates by banks.
It influences lending rates of commercial banks.

Cash Reserve Ratio (CRR):

It was unchanged at 4%.
It is the amount of funds that banks have to keep with the RBI.
The RBI uses CRR to drain out excessive money from the system.

Statutory Liquidity Ratio (SLR):

It was cut by 25 basis points to 19.25% from January 1, 2019.
It is the amount that banks have to maintain as a stipulated proportion of their net demand and time liabilities (NDTL) in the form of liquid assets like cash, gold and unencumbered securities, treasury bills, dated securities etc.
It will be reduced by 25 basis points every quarter until it reaches the 18% level.

Question:

Q. Reserve Bank of India (RBI) in its fifth bimonthly monetary policy review for financial year 2018-19 has decided to maintain status quo in policy rates by keeping repo rate unchanged at?
a. 6.0%
b. 6.5%
c. 7.0%
d. 7.5%