The Reserve Bank of India (RBI) announced its 4th Bi-Monthly Monetary Policy Rates for 2019-20. The three-day policy review meeting held on October 1, 3, 4 of 2019 consisting of 6 members of the Monetary Policy Committee (MPC) was headed by RBI Governor Shaktikanta Das.
i. Repo Rate was reduced by 25 basis points to 5.15% from 5.40% with immediate effect. GDP for 2019-20 was predicted at 6.1% from 6.9%.
ii. The next meeting of the MPC is scheduled to be held from December 3-5, 2019.
Key Points:
- All members of the MPC comprising of Dr. Ravindra H. Dholakia, Dr. Michael Debabrata Patra, Shri Bibhu Prasad Kanungo, Dr. Chetan Ghate, and Dr. Pami Dua voted to reduce the policy repo rate for the fifth consecutive time and to continue with the accommodative stance of monetary policy.
Current rates:
| Policy Rates under Liquidity Adjustment Facility (LAF) | |
| Repo Rate | 5.15% |
| Reverse Repo Rate | 4.90% |
| Marginal standing facility (MSF) Rate | 5.40% |
| Bank Rate | 5.40% |
| Reserve Ratios | |
| Cash reserve Ratio (CRR) | 4% |
| Statutory Liquidity Ratio (SLR) (18.50% from October 12, 2019 It will again change on January 4, 2020) | 18.75% |
| GDP Prediction | |
| GDP for 2019-20 | 6.1% (from 6.9%) |
| Q2:2019-20 | 5.3% |
| H2:2019-20 | 6.6-7.2% |
| Q1:2020-21 | 7.2% |
| CPI Inflation | |
| Q2:2019-20 | 3.4% |
| H2:2019-20 | 3.5-3.7% |
| Q1:2020-21 | 3.6% |
Note:
*H2 means fiscal year second half.
*Q stands for Quarter.
*GDP stands for Gross Domestic Product.
*CPI stands for Consumer Price Index.
Household income limit for borrowers of NBFC-MFIs
- The household income limit for borrowers of Non-Banking Financial Company-Micro Finance Institution (NBFC-MFIs) has been increased from the current level of Rs 1.00 lakh for rural areas and Rs 1.60 lakh for urban/semi urban areas to Rs 1.25 lakh and Rs 2.00 lakh, respectively.
- The lending limit per eligible borrower has been raised from Rs 1 lakh to Rs 1.25 lakh.
Recommendations of the Task Force on Offshore Rupee MarketsÂ
Recommendations of the Task Force on Offshore Rupee Markets headed by Smt. Usha Thorat were accepted.
- Domestic banks will be allowed to freely offer foreign exchange prices to non-residents at all times, out of their Indian books, either by a domestic sales team or through their overseas branches.
- Rupee derivatives (with settlement in foreign currency) will be allowed to be traded in International Financial Services Centres (IFSCs).
SNRR Account
- The scope of non-interest bearing Special Non-resident Rupee (SNRR) Account has been expanded by permitting persons resident outside India to open such accounts to facilitate rupee denominated external commercial borrowing (ECB), trade credit and trade invoicing.
- Restriction on the tenure of SNRR accounts, which is currently 7 years, will be removed.
Payment and settlement systems
- Collateralized liquidity support, which is currently available until 7.45 pm, will now be available round the clock on all National Electronic Funds Transfer (NEFT) working days on 24×7 basis for members of the public from December, 2019.
- In order to strengthen the grievance redressal mechanism for customer complaints, it has been decided to institutionalise an internal ombudsman scheme at the large non-bank pre-paid payment instruments (PPI) issuers to the entities who have more than 10 million/ 1 crore pre-paid payment instruments outstanding.
- In order to increase digitisation in Tier III to Tier VI centres through wider acceptance infrastructure, and as indicated in the Payment System Vision Document 2021 of RBI and also recommended by the Committee on Deepening of Digital Payments (Chairperson: Shri Nandan Nilekani), it has been decided to create an Acceptance Development Fund (ADF).Â
Static Information:
♦ Repo Rate: It is the rate at which RBI lends money to commercial banks.
♦ Reverse Repo rate: It is the rate at which RBI borrows money from commercial banks.
♦ Cash Reserve Ratio (CRR): The share of net demand and time liabilities (deposits) that banks must maintain a cash balance with the RBI.
♦ Statutory Liquidity Ratio (SLR): The share of net demand and time liabilities (deposits) that banks must maintain in safe and liquid assets, such as government securities, cash, and gold.
♦ Bank Rate: It is the rate at which the RBI is ready to buy or rediscount bills of exchange or other commercial papers for the long term.
♦ Marginal Standing Facility Rate (MSF): The rate at which the scheduled banks can borrow funds from the RBI overnight, against the approved government securities is termed as MSF.