MPC holds repo rate at 5.5%
▪ Policy Rates Unchanged:
✓ The MPC voted to maintain the policy repo rate at 5.50%.
✓ The standing deposit facility (SDF) rate remains at 5.25%.
✓ The marginal standing facility (MSF) rate and the bank rate remain at 5.75%.
▪ This decision is towards achieving the medium-term target for consumer price index (CPI) inflation
of 4% within a band of +/- 2%, while supporting growth.
About Repo Rate and Reverse Repo Rate
▪ The repo rate is the interest rate charged by the RBI when commercial banks borrow money from it.
▪ The reverse repo rate is the rate at which the central bank pays interest to commercial banks for parking their excess cash.
▪ Higher repo rate → Costlier loans for banks → Higher interest rates for consumers & businesses → Slower borrowing & spending.
▪ Lower repo rate → Cheaper loans for banks → Lower interest rates for borrowers → Increased borrowing & spending.
Committee related to Monetary Policy
▪ Chakravarty Committee (1982-85): It was set up by the then RBI Governor Manmohan Singh under Sukhamoy Chakravarty to review monetary policy.
▪ Urjit Patel Committee (2014): It formalized inflation targeting, setting the 4% target (±2% band), a target first proposed by the Chakravarty Committee 40 years ago.
