{"id":136840,"date":"2024-10-10T19:33:24","date_gmt":"2024-10-10T14:03:24","guid":{"rendered":"https:\/\/pwonlyias.com\/stage\/?post_type=current-affairs&#038;p=136840"},"modified":"2025-02-13T15:59:51","modified_gmt":"2025-02-13T10:29:51","slug":"rbi-maintains-status-quo-on-interest-rates","status":"publish","type":"current-affairs","link":"https:\/\/pwonlyias.com\/stage\/current-affairs\/rbi-maintains-status-quo-on-interest-rates","title":{"rendered":"RBI Maintains Status Quo On Interest Rates"},"content":{"rendered":"<p><span style=\"font-weight: 400;\">RBI maintained its<\/span><b> benchmark interest rate at 6.5%<\/b><span style=\"font-weight: 400;\"> for the 10th successive monetary policy review since April 2023.<\/span><\/p>\n<h2><span style=\"font-size: 18pt;\"><b>More on news<\/b><\/span><\/h2>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">The RB<\/span><b>I maintained the repo rate at 6.5% <\/b><span style=\"font-weight: 400;\">due to<\/span><b> robust domestic growth and concerns over inflation<\/b><span style=\"font-weight: 400;\"> despite a slight dip in Q1 FY2025 growth.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">The stance shifted to &#8216;neutral&#8217; focusing on growth, cautious of potential geopolitical risks impacting inflation<\/span><\/li>\n<\/ul>\n<p style=\"text-align: center;\"><span class=\"vc_button\"><a href=\"https:\/\/www.pw.live\/batches\/upsc\/pw-only-ias?utm_source=seo+upsc+batch&#038;utm_medium=seo+upsc&#038;utm_campaign=seo&#038;utm_id=upsc\" target=\"_blank\" rel=\"noopener\">Enroll now for UPSC Online Classes<\/a><\/span><\/p>\n<h2><span style=\"font-size: 18pt;\"><b>About Repo rate<\/b><\/span><\/h2>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Repo rate refers to the rate at which commercial banks borrow money by selling their securities to the Central Bank of our country i.e. Reserve Bank of India (RBI).<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">It is one of the main tools of RBI to keep inflation under control.<\/span><\/li>\n<\/ul>\n<h2><span style=\"font-size: 18pt;\"><b>Monetary Policy Committee<\/b><\/span><\/h2>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Monetary Policy Framework Agreement 2015:<\/b><span style=\"font-weight: 400;\"> MPC was set up consequent to the agreement reached between Government and RBI to task RBI with the responsibility for price stability and inflation targeting.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Under Section 45ZB of the amended RBI Act, 1934, the central government is empowered to constitute a six-member Monetary Policy Committee.\u00a0<\/span>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">The first such MPC was constituted in 2016.<\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Inflation Target<\/b><span style=\"font-weight: 400;\">: RBI is responsible for containing <\/span><b>inflation targets at 4% (with a standard deviation of 2%) <\/b><span style=\"font-weight: 400;\">in the medium term.<\/span>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">The Central Government determines the<\/span><b> inflation target<\/b><span style=\"font-weight: 400;\"> in terms of the Consumer Price Index, once in every <\/span><b>five years<\/b><span style=\"font-weight: 400;\"> in consultation with the RBI.\u00a0<\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Function MPC: <\/b><span style=\"font-weight: 400;\">To determine the policy interest rate required to achieve the inflation target.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Quorum for a meeting: <\/b><span style=\"font-weight: 400;\">Four Members, one of whom shall be the Governor and, in his absence, the Deputy Governor, who is the Member of the MPC.<\/span><\/li>\n<li aria-level=\"1\"><b>Decision making of MPC:\u00a0<\/b>\n<ul>\n<li><span style=\"font-weight: 400;\">The MPC takes decisions based on majority vote (by those who are present and voting).\u00a0<\/span><\/li>\n<li><span style=\"font-weight: 400;\">In case of a tie, the RBI governor will have the second or casting vote.\u00a0<\/span><\/li>\n<li><span style=\"font-weight: 400;\">The decision of the Committee would be binding on the RBI.<\/span><\/li>\n<\/ul>\n<\/li>\n<li><b>Members of MPC<\/b>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">RBI Governor as its ex-officio chairperson<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Deputy Governor in charge of monetary policy<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">An officer of the Bank to be nominated by the Central Board<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Three persons to be appointed by the central government<\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Policy stance: <\/b><span style=\"font-weight: 400;\">The policy stance tells everyone what the MPC is trying to achieve by its actions.\u00a0<\/span>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">A policy stance tells us whether the MPC is trying to contain inflation or boost growth while containing inflation or simply being neutral.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Various policy stance of MPC can be categorised as shown in table below:<\/span><\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<p style=\"text-align: center;\"><span class=\"vc_button\"><a href=\"https:\/\/store.pw.live\/govt-entrance-exams\/upsc-books\/upsc-textbooks?utm_source=SEO&#038;utm_medium=PW+Live&#038;utm_campaign=UPSC+Textbooks\" target=\"_blank\" rel=\"noopener\"><span style=\"font-weight: 400;\">Check Out UPSC NCERT Textbooks From PW Store<\/span><\/a><\/span><\/p>\n<div class=\"vc_table_green\"><\/p>\n<table style=\"width: 100%;\">\n<tbody>\n<tr>\n<td style=\"width: 20.4819%;\"><b>Accommodative<\/b><\/td>\n<td style=\"width: 80.8732%;\">\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Central bank is <\/span><b>prepared to expand the money supply <\/b><span style=\"font-weight: 400;\">to boost economic growth.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Willing to cut the interest rates i.e Rate hike is ruled out<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Adopts an accommodative policy when growth needs policy support and inflation is not the immediate concern.<\/span><\/li>\n<\/ul>\n<\/td>\n<\/tr>\n<tr>\n<td style=\"width: 20.4819%;\"><b>Neutral<\/b><\/td>\n<td style=\"width: 80.8732%;\">\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Central bank can either <\/span><b>cut rate or increase rate<\/b><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Adopted when the policy priority is equal on both inflation and growth.<\/span><\/li>\n<\/ul>\n<\/td>\n<\/tr>\n<tr>\n<td style=\"width: 20.4819%;\"><b>Hawkish Stance<\/b><\/td>\n<td style=\"width: 80.8732%;\">\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Central bank\u2019s top priority is to keep inflation low.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Central bank is willing to hike interest rates to curb money supply and thus reduce the demand.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Also indicates tight monetary policy.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Increases rates or &#8216;tightens&#8217; the monetary policy<\/b><span style=\"font-weight: 400;\"> indicating Banks to increase their rate of interest on loans to end borrowers.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">\u00a0It curbs demand in the financial system.<\/span><\/li>\n<\/ul>\n<\/td>\n<\/tr>\n<tr>\n<td style=\"width: 20.4819%;\"><b>Calibrated Tightening<\/b><\/td>\n<td style=\"width: 80.8732%;\">\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">During the current rate cycle, a cut in the repo rate is off the table.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">However, the rate hike will happen in a calibrated manner.<\/span><\/li>\n<\/ul>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p><\/div>\n<div class=\"vc_table_green\"><\/p>\n<table style=\"width: 100.043%;\">\n<tbody>\n<tr>\n<td style=\"width: 130.811%; text-align: center; border-style: solid; border-color: #000000;\" colspan=\"2\"><span style=\"font-size: 18pt;\"><b>Must Read<\/b><\/span><\/td>\n<\/tr>\n<tr>\n<td style=\"width: 50.5357%; text-align: center; border-style: solid; border-color: #000000;\"><a href=\"https:\/\/pwonlyias.com\/stage\/editorial-analysis\/\" target=\"_blank\" rel=\"noopener\"><span style=\"font-weight: 400;\">UPSC Daily Editorials<\/span><\/a><\/td>\n<td style=\"width: 80.2753%; text-align: center; border-style: solid; border-color: #000000;\"><a href=\"https:\/\/pwonlyias.com\/stage\/daily-current-affairs\/\" target=\"_blank\" rel=\"noopener\"><span style=\"font-weight: 400;\">UPSC Daily Current Affairs<\/span><\/a><\/td>\n<\/tr>\n<tr>\n<td style=\"width: 50.5357%; text-align: center; border-style: solid; 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2023.<\/p>\n","protected":false},"author":11,"featured_media":0,"menu_order":0,"comment_status":"open","ping_status":"open","template":"","format":"standard","meta":{"rank_math_lock_modified_date":false,"footnotes":""},"tags":[],"paper-wise":[2089],"subject":[2100],"acf":[],"_links":{"self":[{"href":"https:\/\/pwonlyias.com\/stage\/wp-json\/wp\/v2\/current-affairs\/136840"}],"collection":[{"href":"https:\/\/pwonlyias.com\/stage\/wp-json\/wp\/v2\/current-affairs"}],"about":[{"href":"https:\/\/pwonlyias.com\/stage\/wp-json\/wp\/v2\/types\/current-affairs"}],"author":[{"embeddable":true,"href":"https:\/\/pwonlyias.com\/stage\/wp-json\/wp\/v2\/users\/11"}],"replies":[{"embeddable":true,"href":"https:\/\/pwonlyias.com\/stage\/wp-json\/wp\/v2\/comments?post=136840"}],"version-history":[{"count":2,"href":"https:\/\/pwonlyias.com\/stage\/wp-json\/wp\/v2\/current-affairs\/136840\/revisions"}],"predecessor-version":[{"id":136842,"href":"https:\/\/pwonlyias.com\/stage\/wp-json\/wp\/v2\/current-affairs\/136840\/revisions\/136842"}],"wp:attachment":[{"href":"https:\/\/pwonlyias.com\/stage\/wp-json\/wp\/v2\/media?parent=136840"}],"wp:term":[{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/pwonlyias.com\/stage\/wp-json\/wp\/v2\/tags?post=136840"},{"taxonomy":"paper-wise","embeddable":true,"href":"https:\/\/pwonlyias.com\/stage\/wp-json\/wp\/v2\/paper-wise?post=136840"},{"taxonomy":"subject","embeddable":true,"href":"https:\/\/pwonlyias.com\/stage\/wp-json\/wp\/v2\/subject?post=136840"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}