RBI and Monetary Policy Terms Flashcards
Reserve Bank of India and the key monetary policy tools.
- When was RBI established?
- 1 April 1935 under the RBI Act, 1934.
Nationalised on 1 January 1949. - RBI headquarters
- Mumbai (moved from Calcutta in 1937).
- Repo Rate
- Rate at which RBI lends short-term funds to banks against government securities.
- Reverse Repo Rate
- Rate at which RBI borrows funds from banks.
- CRR (Cash Reserve Ratio)
- Share of a bank's NDTL kept as cash with RBI; earns no interest.
- SLR (Statutory Liquidity Ratio)
- Share of NDTL a bank must keep in liquid assets – cash, gold, approved securities.
- MSF (Marginal Standing Facility)
- Overnight borrowing by banks from RBI above the repo rate by dipping into SLR.
- SDF (Standing Deposit Facility)
- Introduced April 2022; floor of the liquidity corridor; RBI absorbs liquidity without collateral.
- Bank Rate
- Rate at which RBI lends long-term to banks without collateral; used for penal rates.
- Monetary Policy Committee (MPC)
- 6 members – 3 from RBI (Governor has casting vote) and 3 nominated by the Government.
- Inflation target of RBI
- 4% CPI inflation with a band of ±2%.
- Open Market Operations (OMO)
- RBI buys or sells government securities to manage liquidity.