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RBI MPC meet to start today; to announce policy stance on August 6

Reserve Bank of India
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 Reserve Bank of India

Highlights

The three-day Monetary Policy Committee (MPC) meet, headed by Reserve Bank of India's (RBI) Governor Shaktikanta Das, will commence today, i.e. on August 4, 2020

The three-day Monetary Policy Committee (MPC) meet, headed by Reserve Bank of India's (RBI) Governor Shaktikanta Das, will commence today, i.e. on August 4, 2020. The MPC will announce its policy stance decisions on August 6, 2020.

The Reserve Bank's rate-setting Monetary Policy Committee (MPC) is meeting to revive the Coronavirus-hit economy and increased demand for one-time loan restructuring by industry chambers. Amid the demand for one-time loan restructuring by industry leaders,

However, the experts are divided over another rate cut by the RBI in the forthcoming policy and have argued that one-time loan restructuring was more essential at this juncture to tide over the COVID-19 situation.

The central bank has been taking steps proactively to limit the damage to the economy caused by the COVID-19 pandemic and subsequent lockdowns.

In its research report 'Ecowrap', The State Bank of India (SBI) has said that with the 115 bps reduction in repo beginning February, banks have already transmitted 72 bps to the customers on fresh loans in the interregnum, perhaps a milestone in terms of policy rate transmission in India. It added, large banks have transmitted as much as 85 basis points.

RBI in its previous MPC meeting held in March 2020 slashed policy repo rate by 75 basis points (bps) bringing it down to 4.4 per cent from earlier 5.15 per cent. Repo is the rate at which RBI lends funds to commercial banks when needed. It is a tool that the central bank uses to control inflation.

However, the June meeting was advanced to May 20-22, 2020, given the COVID-19 pandemic. At this off-cycle meet, the MPC decided to bring down repo rate by another 40 bps to 4 per cent, while maintaining its accommodative stance. So basically, the central bank has already slashed policy rates by a good 115 bps this year.

As per the RBI Act 1934, the MPC is required to meet at least four times a year. For the financial year 2020-21, the committee was scheduled to meet five times and they are June 3-5, 2020, August 4-6, 2020, September 29-30 to October 1, 2020, December 2-4, 2020, and February 3-5 2021.

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