13 December 2021

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RBI announces Monetary Policy and keeps repo rates unchanged


The Monetary Policy Committee (MPC) decides to keep the policy repo rate under the liquidity adjustment facility (LAF) unchanged at 4.0 per cent on the basis of an assessment of the current and evolving macro-economic situation. The reverse repo rate under the LAF remains unchanged at 3.35 per cent and the marginal standing facility (MSF) rate and the Bank Rate at 4.25 per cent.

The MPC also decided to continue with the accommodative stance as long as necessary to revive and sustain growth on a durable basis and to mitigate the impact of COVID-19 on the economy. These decisions are in consonance with the objective of achieving the medium-term target for consumer price index (CPI) inflation of 4 per cent, while supporting growth. The recovery in domestic economic activity is turning increasingly broad-based, with the expanding vaccination coverage, slump in fresh COVID-19 cases and rapid normalisation of mobility.

Section 45ZB of the amended RBI Act, 1934 provides for an empowered six-member monetary policy committee (MPC) constituted by the Central Government. The MPC determines the policy interest rate required to achieve the inflation target. The Reserve Bank’s Monetary Policy Department (MPD) assists the MPC in formulating the monetary policy. Repo rate refers to the (fixed) interest rate at which the Reserve Bank provides overnight liquidity to banks against the collateral of government and other approved securities under the liquidity adjustment facility (LAF). Reverse Repo Rate is (fixed) interest rate at which the Reserve Bank absorbs liquidity, on an overnight basis, from banks against the collateral of eligible government securities under the LAF.

Tags : Monetary Policy Repo rate Announcement

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