{"id":40384,"date":"2024-04-06T04:28:20","date_gmt":"2024-04-05T22:58:20","guid":{"rendered":"https:\/\/vajiramandravi.com\/current-affairs\/?p=40384"},"modified":"2025-10-13T14:03:00","modified_gmt":"2025-10-13T08:33:00","slug":"monetary-policy-committee","status":"publish","type":"post","link":"https:\/\/vajiramandravi.com\/current-affairs\/monetary-policy-committee\/","title":{"rendered":"Monetary Policy Committee Meeting of RBI"},"content":{"rendered":"<h2>What\u2019s in today\u2019s article?<\/h2>\n<ul>\n<li>Why in News?<\/li>\n<li>What is Monetary Policy Committee (MPC)?<\/li>\n<li>Key highlights of the MPC meeting<\/li>\n<li>New Measures Announced by RBI<\/li>\n<\/ul>\n<h2>Why in News?<\/h2>\n<p>The recent Monetary Policy Committee meeting of the RBI Friday kept the repo rate unchanged for the seventh consecutive time at 6.5 per cent.<\/p>\n<p>It also indicated the possibility of retail inflation coming below the crucial level of four per cent in the second quarter (July-September) of FY 2025.<\/p>\n<h2>What is Monetary Policy Committee (MPC)?<\/h2>\n<ul>\n<li><strong>The Committee<\/strong>\n<ul>\n<li>Under Section 45ZB of the amended RBI Act, 1934, the central government is empowered to constitute a six-member <a href=\"https:\/\/vajiramandravi.com\/current-affairs\/what-is-the-monetary-policy-committee-mpc\/\" target=\"_blank\">Monetary Policy Committee (MPC)<\/a>.<\/li>\n<li>MPC will determine the policy interest rate required to achieve the inflation target. The first such MPC was constituted in September 2016.<\/li>\n<\/ul>\n<\/li>\n<li><strong>Members of MPC<\/strong>\n<ul>\n<li>As per the amended RBI act, the MPC shall consist of\u00a0\n<ul>\n<li>the RBI Governor as its ex officio chairperson,\u00a0<\/li>\n<li>the Deputy Governor in charge of monetary policy,\u00a0<\/li>\n<li>an officer of the Bank to be nominated by the Central Board, and\u00a0<\/li>\n<li>three persons to be appointed by the central government.\u00a0<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<\/li>\n<li><strong>Functions of MPC<\/strong>\n<ul>\n<li><strong>Setting Policy Interest Rates<\/strong>: The primary function of the MPC is to determine the policy interest rates, specifically the repo rate.<\/li>\n<li><strong>Inflation Targeting<\/strong>: The current inflation target set by the government is a Consumer Price Index (CPI) inflation target of 4% with a tolerance band of +\/- 2%.<\/li>\n<li><strong>Economic Analysis and Forecasting<\/strong>: The MPC conducts thorough analysis and forecasting of various economic indicators, including inflation, GDP growth, employment, fiscal conditions, and global economic developments.<\/li>\n<li><strong>Decision-Making<\/strong>: The MPC meets at least four times a year to review the <a href=\"https:\/\/vajiramandravi.com\/current-affairs\/what-is-monetary-policy\/\" target=\"_blank\">monetary policy<\/a> stance.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<h2>Key highlights of the MPC meeting<\/h2>\n<ul>\n<li><strong>Repo rate unchanged<\/strong>\n<ul>\n<li>The meeting decided to keep the repo rate unchanged at 6.5 per cent.\n<ul>\n<li>The repo rate is the interest rate at which commercial banks take or borrow money from the Reserve Bank of India.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<\/li>\n<li><strong>Retained the policy stance as withdrawal of accommodation<\/strong>\n<ul>\n<li>The RBI has retained the policy stance as withdrawal of accommodation despite the deficit in the liquidity in recent weeks.\n<ul>\n<li>Withdrawal of accommodation means reducing the money supply in the system to control inflation.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<\/li>\n<li><strong>GDP growth and inflation forecast<\/strong>\n<ul>\n<li>The central bank has retained the <a href=\"https:\/\/vajiramandravi.com\/current-affairs\/gdp-growth\/\" target=\"_blank\">GDP growth<\/a> at 7 per cent and <a href=\"https:\/\/vajiramandravi.com\/current-affairs\/retail-inflation-upsc\/\" target=\"_blank\">retail inflation<\/a> at 4.5 per cent for fiscal 2024-25.\n<ul>\n<li>In February, CPI inflation print stood at 5.09 per cent compared to 5.1 per cent in January.<\/li>\n<\/ul>\n<\/li>\n<li>Food inflation continues to exhibit considerable volatility impeding the ongoing disinflation process.<\/li>\n<\/ul>\n<\/li>\n<li><strong>The prospects of investment activity remain bright<\/strong>\n<ul>\n<li>This is due to an upturn in the private capex cycle becoming steadily broad-based; persisting and robust government capital expenditure; healthy balance sheets of banks and corporates; rising capacity utilisation.<\/li>\n<li>However, headwinds from protracted geopolitical tensions and increasing disruptions in trade routes pose risks to the outlook.<\/li>\n<\/ul>\n<\/li>\n<li><strong>On Rupee<\/strong>\n<ul>\n<li>The rupee stayed within a certain range compared to other currencies from emerging markets and some advanced economies during 2023-24.\u00a0<\/li>\n<li>This stability showed that India&#8217;s economy is strong, financially stable, and has improved its position in the world market.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<h2>New Measures Announced by RBI<\/h2>\n<ul>\n<li><strong>Proposal for cash deposit in banks through UPI<\/strong>\n<ul>\n<li>Considering the popularity and convenience of <a href=\"https:\/\/vajiramandravi.com\/current-affairs\/upi\/\" target=\"_blank\">UPI<\/a>, the RBI has proposed to enable UPI for cash deposit facility.<\/li>\n<\/ul>\n<\/li>\n<li><strong>Proposal for UPI access for Pre-Paid Instruments (PPIs)<\/strong>\n<ul>\n<li>In order to provide more flexibility to PPIs holders, the RBI has proposed to permit linking of PPIs through third-party UPI applications.\u00a0\n<ul>\n<li>PPIs are a type of financial tool that allows users to load money onto a prepaid account or card for future use.\u00a0<\/li>\n<\/ul>\n<\/li>\n<li>This will enable the PPI holders to make UPI payments like bank account holders.\n<ul>\n<li>At present, UPI payments from bank accounts can be made by linking a bank account through the UPI App of the bank or using any third-party UPI application.\u00a0<\/li>\n<li>However, the same facility is not available for PPIs. PPIs can currently be used to make UPI transactions only by using the application provided by the PPI issuer.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<\/li>\n<li><strong>Proposal for CBDCs via non-bank operators<\/strong>\n<ul>\n<li>RBI also decided for the distribution of <a href=\"https:\/\/vajiramandravi.com\/current-affairs\/what-is-a-central-bank-digital-currency-cbdc\/\" target=\"_blank\">Central Bank Digital Currencies<\/a> (CBDCs) through Non-bank Payment System Operators.\n<ul>\n<li>CBDC is the legal tender issued by a central bank in a digital form. The digital rupee (e-Rupee) is the digital currency launched by RBI.<\/li>\n<li>RBI has demarcated the digital rupee into two broad categories: general purpose (retail) and wholesale.<\/li>\n<\/ul>\n<\/li>\n<li>This will make CBDC \u2013 Retail accessible to broader segment of users.<\/li>\n<\/ul>\n<\/li>\n<li><strong>Proposal to facilitate wider non-resident participation in Sovereign Green Bonds (SGrBs)<\/strong>\n<ul>\n<li>In another move, the RBI is making it easier for non-residents to participate in Sovereign Green Bonds (SGrBs).\u00a0\n<ul>\n<li>Based on an announcement in the Union Budget for FY 2022-23, the Government had issued SGrBs in January 2023.\u00a0<\/li>\n<\/ul>\n<\/li>\n<li>They have decided to allow eligible foreign investors in the <a href=\"https:\/\/vajiramandravi.com\/current-affairs\/international-financial-services-centres-authority-ifsca\/\" target=\"_blank\">International Financial Services Centre<\/a> (IFSC) to invest in these bonds.<\/li>\n<li>At present, <a href=\"https:\/\/vajiramandravi.com\/current-affairs\/what-is-foreign-portfolio-investment-fpi\/\" target=\"_blank\">foreign portfolio investors<\/a> (FPIs) registered with SEBI are permitted to invest in SGrBs under the different routes available for investment by FPIs in government securities.<\/li>\n<\/ul>\n<\/li>\n<li><strong>Introduction of Mobile App for RBI Retail Direct Scheme<\/strong>\n<ul>\n<li>The RBI has decided to launch a Mobile App for its RBI Retail Direct scheme, which was initially introduced in November 2021.\u00a0<\/li>\n<li>This app will provide individual investors with access to maintain gilt accounts with RBI and invest in government securities.\u00a0\n<ul>\n<li>A gilt account is a savings account for government securities, such as treasury bonds.<\/li>\n<li>It is similar to a bank account but uses government securities instead of cash.<\/li>\n<\/ul>\n<\/li>\n<li>The scheme allows investors to purchase securities in primary auctions and trade securities through the NDS-OM platform.<\/li>\n<\/ul>\n<\/li>\n<li><strong>Decided to review the Liquidity Coverage Ratio (LCR) framework<\/strong>\n<ul>\n<li>Banks included in the LCR framework must keep a reserve of high-quality liquid assets (HQLA) to cover the expected net cash outflows over the next 30 days.\u00a0<\/li>\n<li>However, recent events in some places have shown that depositors can quickly withdraw or move their deposits during stressful times, especially using online banking.<\/li>\n<li>Such emerging risks may require a revisit of certain assumptions under LCR framework.\u00a0<\/li>\n<li>Therefore, certain modifications to the LCR framework are being proposed towards facilitating better management of liquidity risk by the banks.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<hr \/>\n<h3>Q.1. What are Pre-Paid Instruments (PPIs)?<\/h3>\n<p>A prepaid payment instrument (PPI) is a digital payment solution that allows users to store money electronically. PPIs can be used for a variety of transactions, including: Online shopping, Bill payments, Money transfers, and Making purchases without a physical bank account.<\/p>\n<h3>Q.2. What is Consumer Price Index (CPI)?<\/h3>\n<p>The Consumer Price Index (CPI) is a price index that measures the average change in price over time for a market basket of consumer goods and services. The market basket includes everything from food items to automobiles to rent.<\/p>\n<p><strong>Source: <\/strong><a href=\"https:\/\/indianexpress.com\/article\/business\/economy\/rbi-mpc-monetory-policy-meeting-repo-rate-shaktikanta-das-inflation-gdp-growth-9251464\/\" target=\"_blank\" rel=\"nofollow noopener\"><u>RBI keeps repo rate unchanged at 6.5%, says waiting for inflation \u2018elephant\u2019 to walk away<\/u><\/a><\/p>\n<p><a href=\"https:\/\/www.thehindu.com\/business\/Economy\/rbi-to-enable-upi-for-cash-deposit-facility-to-allow-foreign-investors-in-ifsc-to-invest-in-sovereign-green-bonds\/article68033447.ece#:~:text=RBI%20Governor%20Shaktikanta%20Das%2C%20while,facility%20through%20use%20of%20UPI.%E2%80%9D\" target=\"_blank\" rel=\"nofollow noopener\"><u>The Hindu<\/u><\/a><\/p>\n<p><a href=\"https:\/\/indianexpress.com\/article\/explained\/explained-economics\/rbi-policy-rates-unchanged-9252604\/\" target=\"_blank\" rel=\"nofollow noopener\"><u>Indian Express<\/u><\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>MPC determines the policy interest rate required to achieve the inflation target.<\/p>\n","protected":false},"author":5,"featured_media":40385,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[18],"tags":[],"class_list":{"0":"post-40384","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-upsc-mains-current-affairs","8":"no-featured-image-padding"},"acf":[],"_links":{"self":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts\/40384","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/users\/5"}],"replies":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/comments?post=40384"}],"version-history":[{"count":0,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts\/40384\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/media\/40385"}],"wp:attachment":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/media?parent=40384"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/categories?post=40384"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/tags?post=40384"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}