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RBI Announces Monetary Policy for FY 2021-22

RBI Monetary policy 2021: Based on an assessment of the current and evolving macroeconomic situation the monetary policy committee at its meeting today decided to keep the repo rate under the liquidity adjustment facility at 4.0 percent.

The monetary policy committee of India

It is a six-member committee. In this, there are three RBI members, and three nominated members by the government which is headed by the RBI governor.

There are few terms and theory we will discuss which will help us understand the monetary policy. And we will also understand how RBI policies are helping to sustain our GDP. The central bank lowered down the GDP to 9.5%.

Repo rate is an important factor. To maintain the GDP it is the same for the 6th time. Repo rate is the rate at which the bank can take loans from RBI. In this way, RBI will give loans to banks at low rates and as a result, the bank will provide loans to the public at low rates.

What RBI says about Repo Rate?

RBI says, how the second wave of Covid-19 came, has changed the outlook. We have to track other ways for example- active monitoring and time measures because they are essential to support the GDP. We need all kinds of supports like fiscal, monetary, or sectorial to come to normal situations again.

CPI Estimate Chart

Estimation of CPI

Inflation Trajectory

To control inflation, we need to increase the repo rate. RBI says that inflation is not a concern, for now. To understand this, we need to know what the Average inflation should be? The average inflation should be only 4%. This year it will be 5.4% in quarter two.

Graph

The inflation trajectory will go upside as there is a rise in international prices of crude oil, logistics costs, etc. Above all, the central and state govt. are told to lower the excise duties, cess, and to keep a check on edible oil prices, pulse market.

What is G-SAP?

G-SAP is a Government Security Acquisition program that includes purchasing and selling of bonds.

RBI is purchasing bonds of 1.20 lac crores from the market. In conclusion, the market will regain liquidity. Moreover, RBI has already purchased the 60,000 crores of bond under the first G-sap. Hence, liquidity of 60,000 crores is already have come to the market.

For more updates like these, keep watching this space!

Business Daily News

RBI Releases Annual Report On GDP Growth!

Reserve Bank of India gave 99,122 crores of rupees to the central government. It is given every year, but this year the amount is huge due to the pandemic. This decision is taken by RBI Board in the annual general meeting where an annual report is also prepared. This report includes the current economic scenario going on in India.

Credit Growth

Credit growth is a measurement tool by which we can find out how much is the rise in demand for loans. Last year, the growth rate reduced so much that now in comparison to it we will see better growth now. Although, it is not the best. RBI predicts 10.5% growth because of the base effect. Bank has much liquidity and is in a strong position. The bank also stated that if a loan or credit is needed for the business firms, then banks are fully capable even in stressful scenarios.

The loan growth rate of banks rose to 5.6% on year till March 2021. It will aid further by liquidity support, Low-interest rates, and the government’s growth-enhancing steps. Moreover, the current Repo rate is 4%.

Inflation

If we see the CPI(consumer price index) inflation, It will be 5% during the year 2021-22. Internationally it is being predicted that there can be an increase in inflation globally. But for India RBI has suggested to state and central governments if inflation is to be controlled, they need to decrease the taxes on fuel. If the taxes aren’t reduced it will affect directly inflation. Consequently, the Repo rate will increase.

Bank Fraud

The fraud in private sector banks to the total value has increased to 33% in the financial year 2021 from 18.4% a year ago. The share of PSBs in fraud is more than that of the Private sector banks.

For more updates like these, keep watching this space!