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RBI updates monetary policy rates

Published on February 08, 2023

Current context: The Reserve Bank of India's Monetary Policy Committee recently held its latest meeting on February 8th, 2023. This was the first meeting since the Finance Minister, Nirmala Sitaraman, presented the budget.

RBI updates monetary policy rates

  • The committee, which consists of four members, holds meetings four times a year to make decisions on critical financial aspects such as the repo rate, interest rate, reverse repo rate, Liquidity Adjustment Facility, Marginal Standing Facility, Bank Rate, Cash Reserve Ratio, Statutory Liquidity Ratio, among others.
  • RBI Governor Shaktikanta Das recently announced the Monetary Policy statement, which included an increase in the repo rate by 25 basis points.
  • This marks the central bank's second increase in the benchmark interest rate in recent months, as they raised it by 35 basis points in December. These rate hikes aim to keep inflation under control, and so far, the repo rate has been raised by 250 basis points.

    The latest monetary policy review has revised the following rates:

    • Repo Rate: 6.50%
    • Standing Deposit Facility (SDF): 6.25%
    • Marginal Standing Facility (MSF): 6.75%
  • The policy announcement defied expectations, causing a jump in bond yields and a stronger currency. On the other hand, the stock market saw a positive reaction, with the Sensex and Nifty trading higher.
  • According to the RBI Governor, the current account deficit will remain manageable, and the Indian rupee has been the least volatile among its Asian counterparts.
  • The RBI also raised their estimated GDP growth for the current fiscal year to 7% and anticipates 6.4% growth for 2023-2024.
  • They expect retail inflation to be 6.5% in the current fiscal year and 5.3% in the next. The RBI will also roll out a prototype program for coin-operated machines using QR codes in 12 cities.

Question:

Q.1  Repo rate increased by how many basis points?
a. 10
b. 20
c. 35
d. 25

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