Second Bi-monthly Monetary Policy Statement, 2016-17

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Dear Readers,
Today Reserve Bank of India (RBI) has published its 2nd Bi-monthly Monetary Policy Statement, 2016-17. So, today we are presenting you a short notes on Current Rates after Second Bi-monthly Policy 2016-17 which is very important for your upcoming banking exams. Read it carefully. The present Current Rates (Policy Rates, Reserve Ratios and Lending/Deposit Rates) are given as below: 

Second Bi-monthly Monetary Policy Statement, 2016-17


Current Rates
Remarks (In respect of previous Bi-monthly Policy)
Policy Rates
Policy Repo Rate 6.50% Unchanged
Reverse Repo Rate 6.00% Unchanged
Marginal Standing Facility Rate (MSF) 7.00% Unchanged
Bank Rate 7.00%
Reserve Ratios
Cash Reserve Ratio (CRR) 4% Unchanged
Statutory Liquidity Ratio (SLR) 21.25% Unchanged
Lending / Deposit Rates
Base Rate 9.30% - 9.70%
Savings Deposit Rate 4.00%
Term Deposit Rate > 1 Year 7.00% - 7.50%

The Reserve Bank of India (RBI) kept the repo rate unchanged at a five-year low of 6.5% in its bi-monthly monetary policy review meeting today. The central bank has cut the repo rate by 150 basis points since January 2015, including a 0.25% reduction in April. The RBI further maintained the reverse repo rate at 6%, and the cash reserve ratio at 4%.

Monetary and Liquidity Measures:

On the basis of an assessment of Second Bi-monthly Monetary Policy Statement, 2016-17, Reserve Bank of India has decided to:
i) keep the policy repo rate under the liquidity adjustment facility (LAF) unchanged at 6.5 per cent;
ii) keep the cash reserve ratio (CRR) of scheduled banks unchanged at 4.0 per cent of net demand and time liabilities (NDTL); and
iii) continue to provide liquidity as required but progressively lower the average ex ante liquidity deficit in the system from one per cent of NDTL to a position closer to neutrality.
Consequently, the reverse repo rate under the LAF will remain unchanged at 6.0 per cent, and the marginal standing facility (MSF) rate and the Bank Rate at 7.0 per cent.

Below are the basic definitions of the Policy Rates

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) thatbanks must maintain as cash balance with the Reserve Bank.

Statutory Liquidity Ratio (SLR) – The share of net demand and time liabilities (deposits) thatbanks must maintain in safe and liquid assets, such as, government securities, cash and gold.

Bank Rate –
It is the rate at which the Reserve Bank is ready to buy or rediscount bills of exchange or other commercial papers for 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.

Note: The third bi-monthly monetary policy statement will be announced on August 9, 2016. 

Thanks.

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