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Banks Follow RBI's Policy Stance

Published on May 06, 2022
Current Context: Following RBI's announcement of policy rates, the Banks are aligning their interest rates to RBI.
Banks Follow RBI's Policy Stance
  • The Reserve Bank of India, in an unprecedented move, held an emergency meeting of MPC and announced new policy rates to contain the inflation which had soared past the 6% threshold.
  • The Reserve Bank of India has been mandated to maintain inflation in the range of 2 to 6 %. RBI hiked the repo by 40 bps following which ICICI Bank, Bank of Baroda, and Bank of India made corresponding hikes in their interest rates too.
  • As of now, 53 % of the lent amount is linked to MCLR, 25 % to the External Benchmark rates (Repo and G Sec), and 22 % to the fixed rates.
  • Banks following the suit will help contain the inflation as of now an estimated 1.68 lakh crore rupees of excess liquidity exists in the market.

Question:

Q.1 Which is the range of inflation mandated by the Government to RBI?
a. 4 to 6%
b. 2 to 6%
c. 2 to 4%
d. None
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