RBI Monetary Policy 2022- Check Major Highlights
RBI Monetary Policy 2022: The Monetary Policy Committee of RBI met on the 6th, 7th, and 8th of April. After unanimous voting, the RBI MPC meeting came to the decision that the Policy Repo Rate shall remain unchanged at 4%. This is the 11th time consecutively that the repo and reverse repo rates have remained unchanged. In addition to this, the RBI MPC voted to keep the stance accommodative.
What are Repo Rate and Reverse Repo Rates?
Repo rate can be defined as the rate of interest at which the RBI lends short-term funds to the other banks. Whereas, the reverse repo rate is the rate of interest at which the RBI borrows funds from the banks. The Repo rate is always higher than the reverse repo rate. Repo rate controls inflation and deficiency of funds. On the other hand, the reverse repo rate manages cash flow. Currently, the repo rate is at 4% while the reverse repo rate is at 3.35%.
Liquidity Adjustment Facility (LAF)
The Liquidity Adjustment Facility allows banks to borrow money through repos from the RBI. It also allows them to make loans through reverse repos. This ensures financial stability in the markets. The Reserve Bank of India introduced it in 1998 as a product of the Narasimham Committee on Banking Sector Reforms.
According to the RBI Monetary Policy 2022, the RBI will restore LAF to 50bps. Additionally, MSF and Bank rates will remain unaltered at 4.25%
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RBI’s Growth Projection
The Governor of RBI, Shakitkanta Das, spoke about the Gross Domestic Product growth rate in the year 2022-23. The GDP growth is projected at 7.2%. The quarter-wise GDP growth rate is projected as follows.
| Quarter | GDP growth rate |
|---|---|
| Q1 | 6.3% |
| Q2 | 5.8% |
| Q3 | 5.4% |
| Q4 | 5.1% |
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RBI Monetary Policy 2022 FAQs
In the RBI MPC meeting, voting was done for the changes in repo rate and reverse repo rate.
No, both remained unchanged with repo rate at 4% and reverse repo rate at 3.35%
RBI projected GDP growth rate at 7.2% for 2022-23.
Repo rate can be defined as the rate of interest at which the RBI lends short-term funds to the other banks. Whereas, the reverse repo rate is the rate of interest at which the RBI borrows funds from the banks. The Repo rate is always higher than the reverse repo rate.
The Liquidity Adjustment Facility allows banks to borrow money or lend money through repos and reverse repos from/to the RBI
