RBI’s Bimonthly Monetary Policy – June 2021

RBI’s Bimonthly Monetary Policy – June 2021

Part of: GS Prelims and GS-III – Economy; Monetary policy

Various decisions were announced by RBI while unveiling Bimonthly Monetary Policy

• Policy Rate Unchanged: The Policy rate was unchanged at 4% for the sixth time in a row and reverse repo rate at 3.35%
• Growth Prospects downsized: India’s GDP growth rate projection was slashed to 9.5% due to uncertainties caused by second wave of COVID-19
• Liquidity Boost: Rs. 15,000-crore liquidity window to be launched by banks for contact intensive sectors like Hotel and tourism. Also, fresh Rs 16000-crore liquidity line to Small Industries Development Bank of India (SIDBI) for on-lending/ refinancing through novel models and structures.
• Upper limit for MSMEs revised: The maximum limit for borrowers is enhanced from Rs. 25 crore to Rs. 50 crore for MSMEs, small businesses and business loans to individuals

Value Addition

Monetary Policy Committee

• Urjit Patel committee in 2014 recommended the establishment of the Monetary Policy Committee.
• It is a statutory and institutionalized framework under the Reserve Bank of India Act, 1934, for maintaining price stability, while keeping in mind the objective of growth.
• Composition: Six members (including the Chairman) – three officials of the RBI and three external members nominated by the Government of India. The Governor of RBI is ex-officio Chairman of the committee
• Functions: The MPC determines the policy interest rate (repo rate) required to achieve the inflation target (presently 4%). Decisions are taken by majority with the RBI Governor having the casting vote in case of a tie.