Economy Simplified: New initiative of RBI in Credit and Monetary Policy Regime.

1. Transition to bi-monthly monetary policy cycle.
2. On recommendation of the Urjit Patel Committee report, the CPI (Combined) is used by the RBI as the “Headline Inflation” for monetary management.
3. A Monetary Policy Framework (2015) has been put in place – an agreement in this regard was signed between the Government of India and the RBI. Under the framework, the RBI is to ‘target inflation’ at 4 per cent with a variation of +/- 2 per cent. (of the CPI-C).
4. Besides the existing repo route, term repos have been introduced for three sets of tenors – 7, 14 and 28 days – Move aimed at improving the transmission of policy and stability to the loan market.
5. As per the Union Budget 2016-17, individuals will also be allowed by the RBI to participate in the government security market.
6. RBI is progressively reducing banks’ access to overnight liquidity (at the fixed repo rate), and encouraging the banks to increase their dependency on the term repos.

Leave a Comment

Your email address will not be published. Required fields are marked *