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Government has appointed three academics as members of interest-rate setting <keyword id="6375120" type="ORGANIZATION" weightage="20" keywordseo="monetary-policy-committee">Monetary Policy Committee</keyword> - Indian Statistical Institute professor <keyword id="6638266" type="UNKNOWN" weightage="20" keywordseo="Chetan-Ghate">Chetan Ghate</keyword>, Delhi School of Economics director <keyword id="3678398" type="PERSON" weightage="20" keywordseo="Pami-Dua">Pami Dua</keyword> and Ravindra H Dholakia of IIM-Ahmedabad. 
 
The three experts have been appointed for a period of four years. We will tell you all about the three academicians in a slideshow below, but before that here’s a little bit about the other members who will be a part of the committee. 
 The other three members will come from the Reserve Bank of India and will include <keyword id="30067" type="ORGANIZATION" weightage="20" keywordseo="RBI">RBI</keyword> Governor <keyword id="6375119" type="UNKNOWN" weightage="20" keywordseo="Urjit-Patel">Urjit Patel</keyword>, Deputy Governor R. Gandhi, who is in charge of the monetary policy, and Executive Director Michael Patra. Urjit Patel will have a casting vote in case of a tie in the six-member committee. 
 
Setting up of the panel will bring about a landmark change to how central bank decisions are made in the country. It represents a marked change to monetary policy, which was previously decided solely by the RBI Governor. Instead, the Monetary Policy Committee will now strive to ensure that the inflation target decided by the government and the central bank is met. The RBI has the mandate to contain retail inflation within a band of 4%, plus or minus 2 percentage points. 
 
The MPC is slated to sit for its first monetary policy review on 4 October. 
 
Now, more about the academicians who will be deciding the Monetary Policy of India:

These 3 Professors are in the team that will decide India's Monetary Policy

The government on Monday appointed three eminent economists <keyword id="233535" type="PERSON" weightage="20" keywordseo="Ashima-Goyal">Ashima Goyal</keyword>, <keyword id="5497703" type="PERSON" weightage="20" keywordseo="Jayanth-R-Varma">Jayanth R Varma</keyword> and <keyword id="10056821" type="UNKNOWN" weightage="20" keywordseo="shankanka-bhide">Shankanka Bhide</keyword> as members of the rate-setting <keyword id="6375120" type="ORGANIZATION" weightage="20" keywordseo="monetary-policy-committee">Monetary Policy Committee</keyword> of the RBI, sources said. The Appointments Committee of the Cabinet (ACC) headed by the Prime Minister approved the names, the sources said. As per the RBI Act, the three new members would have four-year terms, the sources added. The new members replace Chetan Ghate, professor at the Indian Statistical Institute; Pami Dua, director at the Delhi School of Economics (DSE); and Ravindra Dholakia, professor at the Indian Institute of Management, Ahmedabad. Here’s what you need to know about the new additions to the <keyword id="6369693" type="UNKNOWN" weightage="20" keywordseo="MPC">MPC</keyword>: Goyal is a member of the Prime Minister’s economic advisory council. She was a visiting fellow at Yale university and is now a professor at the Indira Gandhi Institute of Development Research in Mumbai. Bhide works with the New Delhi-based think-tank National Council for Applied Economic Research with a special focus on agriculture, poverty analysis and macroeconomics. Varma is a finance and accounting professor at the Indian Institute of Management, Ahmedabad. He was formerly on the board of Securities and Exchange Board of India (SEBI), the country's capital markets' regulator. SEE ALSO: <a href="https://www.businessinsider.in/policy/economy/news/gst-compensation-deadlock-continues-government-to-release-20000-crore-cess-tonight-and-offers-relief-for-small-companies/articleshow/78496779.cms">GST compensation deadlock continues — government to release ₹20,000 crore cess tonight and offers relief for small companies</a> <a href="https://www.businessinsider.in/defense/news/the-indian-air-force-is-ready-for-a-two-front-war-with-china-and-pakistan-says-air-chief-marshal-rks-bhadauria/articleshow/78488605.cms">The Indian Air Force is ready for a two-front war, says Air Chief Marshal RKS Bhadauria</a> <a href="https://www.businessinsider.in/stock-market/news/tcs-shares-hit-record-high-board-to-mull-over-share-buyback-and-earnings-on-october-7/articleshow/78486980.cms">TCS' value crosses ₹10 trillion after share price rallies more than 7% ahead of earnings</a>

Meet the MPC's new members — Ashima Goyal, Jayanth R Varma, and Shankanka Bhide

<keyword id="7268643" type="UNKNOWN" weightage="20" keywordseo="rbi-governor-shaktikanta-das">RBI Governor Shaktikanta Das</keyword> has emhasised that although there is headroom for further monetary policy action, the "arsenal" has to be kept dry and used judiciously for promoting growth which has been hit hard by the COVID-19 pandemic, according to the MPC minutes released on Thursday. <div type="Article" hostid="261" msid="77388568" title="RBI brings in KV Kamath to set the boundaries for a one-time restructuring of loans" mstype="2" mssubtype="0"></div> After a three-day brainstorming earlier this month, all the six members of the Das-headed Monetary Policy Committee (MPC) had opted for a status quo and left interest rates unchanged. However, the MPC maintained an accommodative stance, implying more rate cuts in future if the need arises to support the coronavirus-hit economy. <div type="Article" hostid="261" msid="77387591" title="‘Watchful’ RBI leaves repo rate unchanged to keep inflation in check" mstype="2" mssubtype="0"></div> As per the minutes, Das also said it would be prudent at this stage to wait for a firmer assessment of the outlook for growth and inflation. "It would be prudent at this stage to wait for a firmer assessment of the outlook for growth and inflation as the staggered opening of the economy progresses, supply bottlenecks ease and the price reporting pattern stabilizes," Das said. The Governor noted that low capacity utilisation amid subdued domestic and external demand is likely to delay early revival of investment demand. Real GDP is likely to shrink in the first half of the year, and growth for the full year 2020-21 is estimated to be negative, he said. Generalised inflationary pressures across food and Consumer Price Index (CPI) excluding food and fuel, in a situation where growth is expected to contract sharply, is a matter of serious concern, Das added. "As I have been reiterating since October 2019, monetary policy is geared towards supporting the economic recovery process. Although there is headroom for further monetary policy action, at this juncture it is important to keep our arsenal dry and use it judiciously," he said. He also felt that "we should wait for some more time" for the cumulative 250 basis points reduction in policy rate since February 2019 to seep into the financial system and further reduce interest rates and spreads. Cautioning that outlook for the economy was grim, RBI Deputy Governor and MPC member Michael Debabrata Patra opined that even when it improves, the expectation is one of slow, hesitant recovery, with the situation likely to worsen before it gets better. The upticks that easing of lockdowns yield are likely to be ephemeral and vulnerable to flattening out due to lack of underlying vigour, he said. A durable revival of the economy depends on sustained policy support to resuscitate activity in various sectors, restore employment, ease financial stresses facing households, businesses and financial intermediaries, instil confidence and anchor financial stability before it slips away, he said. RBI Executive Director Mridul K Saggar said the recovery path is inextricably linked to the course the pandemic might take and complete normalisation will be difficult till it is overcome. External member on the rating setting panel, Ravindra H Dholakia said there are high uncertainties regarding the macroeconomic environment, adding that he was sceptical about the deep stagflationary conditions prevailing in the country. "Although the present circumstances are truly exceptional, the primary mandate given to MPC for inflation targeting at 4 percent with the upper tolerance limit of 6 percent has to be respected," said Dholakia. MPC member Pami Dua was of the view that at this juncture, it is best to adopt a wait and watch strategy and look at incoming data to assess the evolving macroeconomic situation. "I therefore vote to keep the policy rate unchanged and to continue with an accommodative stance as long as necessary to revive growth and mitigate the impact of COVID-19 on the economy, while ensuring that inflation remains within the target, going forward," Dua said. External member Chetan Ghate said he has been advocating a more cautious path for policy rate reductions since February 2019. "However, I have been in a minority in the MPC. Inflation has now been above the upper band of 6 per cent for a number of months. Notwithstanding large rate cuts to spur growth over the last year and a half, growth has steadily declined despite 250 bps in cuts since February 2019," Ghate said. Future MPC meetings should not go soft on inflation, he added. The next MPC meeting is scheduled to held during September 29 to October 1, 2020. SEE ALSO: <a href="https://www.businessinsider.in/finance/news/rbi-governor-shaktikanta-das-leaves-repo-rate-unchanged-to-check-inflation/articleshow/77387591.cms">‘Watchful’ RBI leaves repo rate unchanged to keep inflation in check</a> <a href="https://www.businessinsider.in/finance/banks/news/one-time-loan-restructuring-dilemma-rbi-wont-commit-and-india-inc-wont-stop-asking-for-it/articleshow/77328145.cms">One-time loan restructuring dilemma - RBI won’t commit, and India Inc won’t stop asking for it</a> <a href="https://www.businessinsider.in/finance/news/rbi-brings-in-kv-kamath-to-set-the-boundaries-for-a-one-time-restructuring-of-these-loans/articleshow/77388568.cms">RBI brings in KV Kamath to set the boundaries for a one-time restructuring of loans</a>

RBI Governor wants keep India's monetary war chest dry for future use

Mumbai, Mar 27 () Following are the highlights of the seventh bi-monthly monetary policy statement for 2019-20 by the RBI amid COVID-19 pandemic: * Monetary Policy Committee (MPC) advances meeting scheduled for Apr 1-3 * Repo rate slashed by 75 basis points to 4.4% * Reverse repo rate cut sharply by 90 basis points to 4% making unattractive for banks to deposit funds * MPC votes unanimously for a reduction in the policy repo rate * MPC decides to continue with the accommodative stance as long as it is necessary * Committee votes 4:2 in favour of rate cut; unanimous on change in stance * 2 MPC members Chetan Ghate and Pami Dua voted for a 50 bps rate cut * Several measures taken to infuse liquidity of about Rs 3.74 lakh crore into the financial system * RBI to undertake repo operation to infuse Rs 1 lakh crore * Cash Reserve Ratio (CRR) cut sharply by 100 bps to 3 per cent releasing Rs 1.37 lakh cr into the system * RBI assures to work in mission mode, monitoring the evolving financial market and macroeconomic conditions * MPC for the first time advances meeting date and refrains from giving next meeting date in the wake of evolving situation * GDP growth rate of 5% for 2019-20 at risk from the impact of pandemic * Global slowdown to deepen with adverse implication for India; crude oil slump upside for country * Upside growth impulses to emanate from monetary, fiscal measures and the early containment of COVID-19 * Food prices to soften further on back of record foodgrain production * MPC refrains from giving out growth, inflation outlook for coming fiscal on uncertain outlook * RBI permits all lending institutions to allow 3-month moratorium on payment of installments on term loans * Moratorium on term loan, deferring of interest on working capital will not classify as default * RBI urges banks and other financial institutions to do all they can to keep credit flowing * All instruments - conventional and unconventional - on table to support financial stability and revive growth * RBI assures that banking system in India safe; deposits safe in private bank; public should not resort to panic withdrawal * RBI says macroeconomic fundamental stronger than that in aftermath of 2008 financial market crisis * Last tranche of the capital conservation buffer (CCB) for banks deferred for 6 months to Sep * The minutes of the MPC to be published by April 13. DP BAL ANSANSANS

Highlights of RBI's monetary policy statement

Mumbai, Mar 27 () Following are the highlights of the seventh bi-monthly monetary statement for 2019-20 by the RBI amid COVID-19 pandemic: * Monetary Policy Committee (MPC) advances meeting scheduled for Apr 1-3 * Repo rate slashed by 75 basis points to 4.4% * Reverse repo rate cut sharply by 90 basis points to 4% making unattractive for banks to deposit funds * MPC votes unanimously for a reduction in the policy repo rate * MPC decides to continue with the accommodative stance as long as it is necessary * Committee votes 4:2 in favour of rate cut; unanimous on change in stance * 2 MPC members Chetan Ghate and Pami Dua voted for a 50 bps rate cut * Several measures taken to infuse liquidity of about Rs 3.74 lakh crore into the financial system * RBI to undertake repo operation to infuse Rs 1 lakh crore * Cash Reserve Ratio (CRR) cut sharply by 100 bps to 3 per cent releasing Rs 1.37 lakh cr into the system * RBI assures to work in mission mode, monitoring the evolving financial market and macroeconomic conditions * MPC for the first time advances meeting date and refrains from giving next meeting date in the wake of evolving situation * GDP growth rate of 5% for 2019-20 at risk from the impact of pandemic * Global slowdown to deepen with adverse implication for India; crude oil slump upside for country * Upside growth impulses to emanate from monetary, fiscal measures and the early containment of COVID-19 * Food prices to soften further on back of record foodgrain production * MPC refrains from giving out growth, inflation outlook for coming fiscal on uncertain outlook * RBI permits all lending institutions to allow 3-month moratorium on payment of installments on term loans * Moratorium on term loan, deferring of interest on working capital will not classify as default * RBI urges banks and other financial institutions to do all they can to keep credit flowing * All instruments - conventional and unconventional - on table to support financial stability and revive growth * RBI assures that banking system in India safe; deposits safe in private bank; public should not resort to panic withdrawal * RBI says macroeconomic fundamental stronger than that in aftermath of 2008 financial market crisis * Last tranche of the capital conservation buffer (CCB) for banks deferred for 6 months to Sep * The minutes of the MPC to be published by April 13. DP BAL ANSANS

Highlights of RBI's monetary statement

New Delhi, Dec 19 () Soaring onion prices figured prominently in the deliberations of the high-powered rating setting panel of the Reserve Bank as it voted for status quo in interest rates this month, according to the minutes of the MPC meeting released on Thursday.
 Onion prices are ruling high since September and were in the range of Rs 130-140 a kilogram in Delhi on Friday.
 "Headline inflation rose sharply in September and further in October, driven up by a sudden spike in prices of vegetables as kharif crop was damaged due to unseasonal rains in many parts of the country; increase in prices of onion was particularly sharp," RBI Governor Shaktikanta Das said in the Monetary Policy Committee (MPC) meeting while voting for status quo in the key interest rate.
 The six-member MPC, headed by Das, had kept the repo rate unchanged on December 5 despite moderation in economic growth and easing inflation.
 Along with him, all the other five MPC members -- Chetan Ghate, Pami Dua, Ravindra H Dholakia, Michael Debabrata Patra, and Bibhu Prasad Kanungo -- had voted to retain the repo rate at 5.15 per cent.
 Echoing Das, RBI Deputy Governor Kanungo opined that unseasonal rains in October and early November damaged certain crops and disrupted the mandi arrival patterns.
 "As a result, the temporary demand supply imbalance led to price pressures in several vegetables, especially onion prices," he said, as per the minutes.
 Governor Das further said overall, several uncertainties cloud the growth-inflation outlook.
 "First, the surge in food inflation in last three months, driven up by a spike in onion and other vegetable prices, could be transitory. It is likely to reverse gradually as late kharif output comes to the market," he said.
 In view of this, even as the current food price spike driven by vegetables can be looked through, there is a need for greater clarity as to how the overall food inflation path is going to evolve as there is some uncertainty about the outlook of prices of certain non-vegetable food items such as cereals, pulses, milk and sugar, Das said.
 It is also not clear at this stage as to how the recent increase in telecom charges will play out, even as CPI (retail) inflation excluding food and fuel has moderated, he said.
 Onion prices have risen by 81 per cent in the last one month and are ruling above the Rs 100 per kg mark for the third week in a row in most cities, as government efforts to cool the rates seem to be taking more time than expected.
 Onion prices have shot up as domestic production in kharif and late-kharif seasons (summer-sown) is estimated to have declined by 22 per cent.
 The government has been maintaining that it has taken all possible steps to rein in prices such as allowing imports, imposing a ban on exports and putting restrictions on the quantity of onion which can be stocked by retailers and wholesalers. NKD CS ABM
ABM

High onion prices figured prominently in RBI MPC meeting, minutes show

Mumbai, Feb 22 () India has some distance to go in fully shifting from pro-crony to pro-business policies, Chief Economic Adviser Krishnamurthy Subramanian said on Saturday. It will be the pro-business policies that will enable the "invisible hands of the market" and also take the country to the goal of USD 5 trillion GDP, he added. "Pro-business policies are those that enable fair competition in the country. We have some distance to go in terms of enabling that fully. Pro-crony policies on the other hand just help incumbents and that is something that we have to stay away from in enabling the invisible hands of the market," he said at an alumni conference of his alma mater IIT-Kanpur here. Indian policymaking has been criticised for favouring crony capitalists in the initial decades after Independence, till the country shifted gears by adopting liberalisation in 1991. Subramanian said after the CAG's report on telecom spectrum allocations came out in 2011, investor returns from "connected companies", a euphemism for crony firms, have been very low as compared to the broader indices. The problem with cronyism is that it is not better business models and processes which drive the growth, he said, adding that we should always aim for "creative destruction" where the incumbents are challenged. In a critique of the dominant policy choices in the initial decades after Independence, Subramanian said "the tryst with socialism did not deliver the tryst with destiny", referring to first prime minister Jawaharlal Nehru's famous speech when India attained freedom. He also made a strong case for not depending only on recent work in economics to make policy choices and neglecting age-old texts like the Arthashastra. "Scholarly work isn't something that was written in the last 100 years but dates back millennia," he said. The Arthashastra stresses on ethical ways of creating wealth, he said, adding that we need to focus on creating trust in the markets as well. If governance standards have to be increased in the country, there has to be a greater focus on disclosing related-party transactions, the CEA said. The comments come in the wake of frauds like the one at non-bank lender DHFL. The Union Budget's thrust on 'Assemble in India' should not be seen as substitute to the government's flagship 'Make in India' programme, but as a complementary aspect which will act as a precursor to other goals, he said. On the focus on 'Assemble in India', Subramanian cited the case of Suzuki's entry into the country in 1980s and the developments in the auto sector since then to illustrate that simple assembly of parts to make a car is a precursor to manufacturing and also intellectual property creation. Pointing out to the recently released Economic Survey, he said over four crore well-paying jobs can be created in the country by 2025 by focusing on assembling for the world, and the same can go up to eight crore by 2030. Asked about the Budget's thrust on imposing tariffs on certain sectors and how it has been criticised as being protectionist by some, Subramanian said we need to make a distinction between duties that are imposed on finished products against those on raw materials or intermediate goods which hurt exports. "We need to move towards far more open trade policies on intermediate goods and raw materials to enable exports," he told reporters. To a question on external member of the Monetary Policy Committee Chetan Ghate's pitch for more structural reforms, Subramanian said all measures like rate cuts and reforms work with a lag and we should allow time for their benefits to accrue. AA ABMABM

India needs pro-business, not pro-crony policies, says CEA

Monetary Policy Committee (MPC) has been instituted by the Central Government of India under Section 45ZB of the RBI Act that was amended in 1934. MPC had its first meeting for two days on October 3 and October 4, 2016. The MPC is entrusted with the responsibility of deciding the different policy rates including MSF, Repo Rate, Reverse Repo Rate, and Liquidity Adjustment Facility. Monetary Policy Committee (MPC) has six members and the main objective of this body is to maintain the price stability and boosting up the growth rate of the country’s economy. What is <keyword id="679958" type="ORGANIZATION" weightage="20" keywordseo="RBI-monetary-policy">RBI Monetary Policy</keyword> ? The term ‘Monetary Policy’ is the Reserve Bank of India’s policy pertaining to the deployment of monetary resources under its control for the purpose of achieving GDP growth and lowering the inflation rate. The Reserve Bank of India Act 1934 empowers the RBI to make the monetary policy. We can say that the monetary policy stands for the control measures adopted by the Central Bank of a nation. What the Monetary Policy intends to achieve? As per the suggestions made by Chakravarty Committee, aspects such as price stability, economic growth, equity, social justice, and encouraging the growth of new financial enterprises are some crucial roles connected to the monetary policy of India. While the Government of India tries to accelerate the GDP growth rate of India, the RBI keeps trying to bring down the rate of inflation within a sustainable limit. In order to achieve its main objectives, the Monetary Policy Committee determines the ideal policy interest rate that will help achieve the inflation target in front of the country. Monetary Policy Department (MPD) is an important organ of the Reserve Bank of India that assists the Monetary Policy Committee (MPC) in creating the monetary policy. Monetary Policy Committee Structure Monetary Policy Committee has 6 members as follows: <table style="border-width: initial; border-style: none;"> <tbody><tr> <td style="width: 40.25pt; border-width: 1pt; border-style: solid; border-color: windowtext; padding: 0cm 5.4pt;"> SI. No. </td> <td style="width: 94.5pt; border-top: 1pt solid windowtext; border-right: 1pt solid windowtext; border-bottom: 1pt solid windowtext; border-left-width: initial; border-left-style: none; padding: 0cm 5.4pt;"> Designation </td> <td style="width: 175.5pt; border-top: 1pt solid windowtext; border-right: 1pt solid windowtext; border-bottom: 1pt solid windowtext; border-left-width: initial; border-left-style: none; padding: 0cm 5.4pt;"> The office held </td> <td style="width: 157.25pt; border-top: 1pt solid windowtext; border-right: 1pt solid windowtext; border-bottom: 1pt solid windowtext; border-left-width: initial; border-left-style: none; padding: 0cm 5.4pt;"> Who holds the office as on October 2019 </td> </tr> <tr> <td style="width: 40.25pt; border-right: 1pt solid windowtext; border-bottom: 1pt solid windowtext; border-left: 1pt solid windowtext; border-top-width: initial; border-top-style: none; padding: 0cm 5.4pt;"> </td> <td style="width: 94.5pt; border-top-width: initial; border-style: none solid solid none; border-left-width: initial; border-bottom-width: 1pt; border-bottom-color: windowtext; border-right-width: 1pt; border-right-color: windowtext; padding: 0cm 5.4pt;"> Chair Person </td> <td style="width: 175.5pt; border-top-width: initial; border-style: none solid solid none; border-left-width: initial; border-bottom-width: 1pt; border-bottom-color: windowtext; border-right-width: 1pt; border-right-color: windowtext; padding: 0cm 5.4pt;"> Governor of the Reserve Bank of India </td> <td style="width: 157.25pt; border-top-width: initial; border-style: none solid solid none; border-left-width: initial; border-bottom-width: 1pt; border-bottom-color: windowtext; border-right-width: 1pt; border-right-color: windowtext; padding: 0cm 5.4pt;"> Shri Shaktikanta Das </td> </tr> <tr> <td style="width: 40.25pt; border-right: 1pt solid windowtext; border-bottom: 1pt solid windowtext; border-left: 1pt solid windowtext; border-top-width: initial; border-top-style: none; padding: 0cm 5.4pt;"> </td> <td style="width: 94.5pt; border-top-width: initial; border-style: none solid solid none; border-left-width: initial; border-bottom-width: 1pt; border-bottom-color: windowtext; border-right-width: 1pt; border-right-color: windowtext; padding: 0cm 5.4pt;"> Member, ex officio </td> <td style="width: 175.5pt; border-top-width: initial; border-style: none solid solid none; border-left-width: initial; border-bottom-width: 1pt; border-bottom-color: windowtext; border-right-width: 1pt; border-right-color: windowtext; padding: 0cm 5.4pt;"> Deputy Governor of the Reserve Bank of India, in charge of Monetary Policy </td> <td style="width: 157.25pt; border-top-width: initial; border-style: none solid solid none; border-left-width: initial; border-bottom-width: 1pt; border-bottom-color: windowtext; border-right-width: 1pt; border-right-color: windowtext; padding: 0cm 5.4pt;"> BP Kanungo </td> </tr> <tr> <td style="width: 40.25pt; border-right: 1pt solid windowtext; border-bottom: 1pt solid windowtext; border-left: 1pt solid windowtext; border-top-width: initial; border-top-style: none; padding: 0cm 5.4pt;"> </td> <td style="width: 94.5pt; border-top-width: initial; border-style: none solid solid none; border-left-width: initial; border-bottom-width: 1pt; border-bottom-color: windowtext; border-right-width: 1pt; border-right-color: windowtext; padding: 0cm 5.4pt;"> Member, ex officio </td> <td style="width: 175.5pt; border-top-width: initial; border-style: none solid solid none; border-left-width: initial; border-bottom-width: 1pt; border-bottom-color: windowtext; border-right-width: 1pt; border-right-color: windowtext; padding: 0cm 5.4pt;"> An officer of the Reserve Bank of India nominated by the Central Board </td> <td style="width: 157.25pt; border-top-width: initial; border-style: none solid solid none; border-left-width: initial; border-bottom-width: 1pt; border-bottom-color: windowtext; border-right-width: 1pt; border-right-color: windowtext; padding: 0cm 5.4pt;"> Dr. Michael Debabrata Patra </td> </tr> <tr> <td style="width: 40.25pt; border-right: 1pt solid windowtext; border-bottom: 1pt solid windowtext; border-left: 1pt solid windowtext; border-top-width: initial; border-top-style: none; padding: 0cm 5.4pt;"> </td> <td style="width: 94.5pt; border-top-width: initial; border-style: none solid solid none; border-left-width: initial; border-bottom-width: 1pt; border-bottom-color: windowtext; border-right-width: 1pt; border-right-color: windowtext; padding: 0cm 5.4pt;"> Member </td> <td style="width: 175.5pt; border-top-width: initial; border-style: none solid solid none; border-left-width: initial; border-bottom-width: 1pt; border-bottom-color: windowtext; border-right-width: 1pt; border-right-color: windowtext; padding: 0cm 5.4pt;"> Professor, Indian Institute of Management, Ahmedabad </td> <td style="width: 157.25pt; border-top-width: initial; border-style: none solid solid none; border-left-width: initial; border-bottom-width: 1pt; border-bottom-color: windowtext; border-right-width: 1pt; border-right-color: windowtext; padding: 0cm 5.4pt;"> Dr. Ravindra H. Dholakia </td> </tr> <tr> <td style="width: 40.25pt; border-right: 1pt solid windowtext; border-bottom: 1pt solid windowtext; border-left: 1pt solid windowtext; border-top-width: initial; border-top-style: none; padding: 0cm 5.4pt;"> </td> <td style="width: 94.5pt; border-top-width: initial; border-style: none solid solid none; border-left-width: initial; border-bottom-width: 1pt; border-bottom-color: windowtext; border-right-width: 1pt; border-right-color: windowtext; padding: 0cm 5.4pt;"> Member </td> <td style="width: 175.5pt; border-top-width: initial; border-style: none solid solid none; border-left-width: initial; border-bottom-width: 1pt; border-bottom-color: windowtext; border-right-width: 1pt; border-right-color: windowtext; padding: 0cm 5.4pt;"> Director, Delhi School of Economics </td> <td style="width: 157.25pt; border-top-width: initial; border-style: none solid solid none; border-left-width: initial; border-bottom-width: 1pt; border-bottom-color: windowtext; border-right-width: 1pt; border-right-color: windowtext; padding: 0cm 5.4pt;"> Professor Pami Dua </td> </tr> <tr> <td style="width: 40.25pt; border-right: 1pt solid windowtext; border-bottom: 1pt solid windowtext; border-left: 1pt solid windowtext; border-top-width: initial; border-top-style: none; padding: 0cm 5.4pt;"> </td> <td style="width: 94.5pt; border-top-width: initial; border-style: none solid solid none; border-left-width: initial; border-bottom-width: 1pt; border-bottom-color: windowtext; border-right-width: 1pt; border-right-color: windowtext; padding: 0cm 5.4pt;"> Member </td> <td style="width: 175.5pt; border-top-width: initial; border-style: none solid solid none; border-left-width: initial; border-bottom-width: 1pt; border-bottom-color: windowtext; border-right-width: 1pt; border-right-color: windowtext; padding: 0cm 5.4pt;"> Professor, Indian Statistical Institute (ISI) </td> <td style="width: 157.25pt; border-top-width: initial; border-style: none solid solid none; border-left-width: initial; border-bottom-width: 1pt; border-bottom-color: windowtext; border-right-width: 1pt; border-right-color: windowtext; padding: 0cm 5.4pt;"> Shri Chetan Ghate </td> </tr> </tbody></table> The ex- Officio members of the committee hold the office for a term of four years or until the next order, whichever happens earlier. Monetary Policy Instruments and how they are managed Monetary policy instruments are of two types namely qualitative instruments and quantitative instruments. The list of quantitative instruments include Open Market Operations, Bank Rate, Repo Rate, Reverse Repo Rate, Cash Reserve Ratio, Statutory Liquidity Ratio, Marginal standing facility and Liquidity Adjustment Facility (LAF). Qualitative Instruments refer to direct action, change in the margin money and moral suasion. The instruments listed above are managed and regulated as per the needs of the country’s economy. These instruments are effectively used in order to ensure the money supply in the economy so that the inflation rate is stabilized to realize economic growth.

Monetary Policy Committee (MPC) Of India: Its Purpose, Structure and Responsibilities

Mumbai, Jun 5 () RBI Governor Shaktikanta Das underlined the need for moving full throttle to ease financing conditions for reviving consumption and revitalizing investment once the coronavirus-induced lockdown is lifted, as per the minutes of the MPC meeting released by the central bank on Friday. The twenty-third meeting of the Monetary Policy Committee (MPC) was originally scheduled from June 3 to 5, 2020, but was advanced to May 20-22 in view of the ongoing COVID-19 pandemic. Following the meeting of the key rate-setting body, the RBI reduced the key policy rate by 40 basis points, bringing it down to a historic low of 4 per cent. All the six members of the MPC, including Das, were of the opinion that the impact of COVID-19 on the economy was more adverse than the initially expected as the lockdown was imposed with an aim to check the spread of the coronavirus pandemic, the minutes showed. Das said the risks to growth have become far more severe than in the assessment at the end of March 2020. It is expected that this diagnosis will be validated by hard data over the next few months, even as the overall outlook continues to be highly uncertain, he said. "The key challenge for monetary policy at this stage is to resuscitate domestic demand to avoid any harmful effect on income and employment in the short run and potential growth over the medium term. For strengthening domestic demand, it is important to revive consumer and business confidence," said Das, as per the minutes. The government has already announced a variety of measures to provide economic support to various sectors of the economy and protect the interests of vulnerable sections of society. The Reserve Bank has also been proactively managing liquidity to ensure that funds flow to all productive sectors of the economy. The RBI has also been easing monetary policy to reduce the cost of funds/capital to revive domestic demand. "While all these measures should help support demand as and when the nation-wide lockdown is lifted, but given the enormity of a collapse in demand, the need is to move ahead full throttle to ease financing conditions further so as to revive consumption and revitalize investment," the Governor stressed. MPC member and RBI Deputy Governor Michael Debabrata Patra said at the current juncture, the all-out effort is to maintain and sustain, with the hope that when life is secure, resources, energy and time can be marshalled to rebuild and revive. "In fact, my view is that the damage is so deep and extensive that India's potential output has been pushed down, and it will take years to repair. "In the deliberations of the MPC, my view is that the threats to growth have to be addressed frontally and aggressively, or risk a more dire outlook," he said. RBI's Executive Director, appointed as MPC member in January, was of the view that the economic activity is expected to contract in 2020-21. While supply lines are likely to be restored as lockdown is relaxed, demand would take far longer to revive to pre-COVID levels. "Even as some support will be provided by government expenditure, overall consumption is likely to slow down due to a slump in private consumption. More than private consumption, however, it is investment demand which is expected to be hit hard in this uncertain environment and may be a huge drag on economic activity in the near future with attendant implications for potential growth," he said. During the MPC deliberations, Ravindra H Dholakia said once the situation returns to normal and the fiscal and monetary boost measures start generating impacts, the recovering economy may require some further boost. It is prudent to preserve some space for the future, he opined. Pami Dua was of the view that in order to revive growth and mitigate the economic impact of COVID-19, it is important to ease financial conditions further. While voting for 40 basis points cut in repo rate, Dua said in the current scenario, with heightened uncertainty and a near-standstill in economic activity, reduction in policy rates may not necessarily lead to an immediate increase in borrowing but should raise consumer confidence and investor sentiment, going forward. Chetan Ghate, the only member who voted for 25 bps cut in the repo, said the strongest argument for a big rate cut would, therefore, be the dire growth outcomes because of COVID. "However, such rate cuts should be saved for when the economy starts reviving, and not when we are in a lock-down. Rate cuts, assuming that there is transmission and banks lend, works most effectively when the economy is on the upside. The MPC should keep some gunpowder dry," he said. The other five members of the MPC had voted for a 40 basis points rate cut. NKD CS MR MR

RBI guv for going full throttle to ease financing conditions for reviving economy: MPC minutes

(Eds: Adding details) Mumbai, May 22 () The Reserve Bank on Friday unexpectedly slashed benchmark interest rates to their lowest levels since 2000 and extended the moratorium on repayment of bank for three months to ramp up support for the economy which is likely to contract for the first time in over four decades. The central bank, which advanced the monetary policy committee (MPC) meeting for the second time since March, extended the three-month moratorium of loan repayments, from June 1 to August 31 and raised the limit on banks' group exposure to companies. It also increased and pre and post-shipment of credits for exports from 1 year to 15 months and gave additional three months to foreign portfolio investors to meet investment needs. The benchmark repurchase (repo) rate was cut by 40 basis points to 4 per cent, the lowest since the benchmark came into being in 2000, Governor Shaktikanta Das said. Consequently, the reverse repo rate was cut to 3.35 per cent from 3.75 per cent. The benchmark rates decide the interest on home, auto and other loans. They also dictate interest rates on savings deposits, which are likely to fall in tandem. The Governor said the MPC had voted to maintain its accommodative stance, implying more rate cuts in the future if the need arises. In its first official forecast for economic growth, the central bank said the gross domestic product (GDP) is likely to contract in FY21 (April 2020 to March 2021) as a direct fallout of the outbreak of coronavirus and ensuing lockdown. Even before the coronavirus outbreak, the Indian economy was experiencing a slowdown, with GDP growth declining to a projected 4.9 per cent in 2019-20 fiscal, its slowest pace in the last decade. "The macroeconomic impact of the pandemic is turning out to be more severe than initially anticipated, and various sectors of the economy are experiencing acute stress," RBI said adding that beyond the destruction of economic and financial activity, livelihood and health are severely affected. Das said the combined impact of demand compression and supply disruptions will depress economic activity in the first half of the year, with some pick-up in growth impulses being seen in H2 2021 onwards. India has been under lockdown since March 25 to contain the spread of the virus, resulting in supply disruptions and demand compression. Das said domestic economic activity has been impacted severely by the lockdown that has been extended till May 31. "High-frequency indicators point to a collapse in demand beginning March 2020 across both urban and rural segments," he said. Supplementing government's COVID-19 stimulus that mostly comprised of credit lines to small business and farmers, RBI said it will facilitate the flow of funds at affordable rates and revive animal spirits. "The RBI will continue to remain vigilant and in battle readiness to use all its instruments and even fashion new ones, as the recent experience has demonstrated, to address the dynamics of the unknown future. "The goals, as I have enunciated earlier, are to keep the financial system and financial markets sound, liquid and smoothly functioning; to ensure access to finance to all, especially those that tend to get excluded by financial markets; and to preserve financial stability," Das said. The RBI will continue to remain vigilant and in battle readiness to use all its instruments and even fashion new ones, as recent experience has demonstrated, to address dynamics of the unknown future, he stated. Five of the six-member monetary policy committee (MPC) including Das voted for a 40 bps reduction in policy repo rate, while Chetan Ghate voted for a reduction by 25 bps. The RBI supplemented the interest rate cut by extending by till August the permission to all banks to give a three-month moratorium on payment of monthly instalments on all outstanding loans, providing relief to home and auto buyers as well as real estate sector where construction activities are at a standstill. The moratorium on interest on working capital was also extended by three months. Also, interest accumulated for the six-month moratorium period can be converted into a term loan, Das said adding the rescheduling of payments on account of the moratorium/deferment will not qualify as default. Further, bank exposure to corporates has been raised to 30 per cent of the group's eligible capital base from the current limit of 25 per cent, a move that will provide headroom for additional credit required by large corporates. Das said the inflation outlook is highly uncertain due to the outbreak of the COVID-19 pandemic and expressed concern over elevated prices of pulses. He also said there is a need to review import duties to moderate prices. Headline inflation may remain firm in the first half of the year and may ease in the second half. Inflation may fall below 4 per cent in the third or fourth quarter of the current fiscal, according to the Governor. "If the inflation trajectory evolves as expected, more space will open up to address the risks to growth," he said. This is the second straight cut in interest rates in two months. On March 27, RBI had cut interest rates by 75 basis points. "After extensive discussions, the MPC voted unanimously for a reduction in policy repo rate and for maintaining the accommodative stance of the monetary policy as long as necessary to revive growth and to mitigate the impact of COVID-19 while ensuring that inflation remains within the target," Das said. DP ANZ ANZ ANS ANS

RBI's 2nd booster shot to economy: Key interest rates slashed to lowest levels since 2000

Mumbai, Dec 31 () When the Narendra Modi government, stumped by the sudden resignation of Urjit Patel, parachuted retired bureaucrat Shaktikanta Das to RBI in December 2018, many expected a great lull in the public acrimony that marred the days of his academically more illustrious predecessors Patel and Raghuram Rajan.
 And 'the history graduate', as Das was parodied in his initial days, did not disappoint as the 25th governor of the central bank. He completed one year at the helm on December 12.
 But challenges are galore for the nation's chief money man as Das' record-setting rate cuts did not alleviate credit crisis, especially in the shadow banking space, and now turmoil in the cooperative banks sector due to the PMC scam.
 Also, falling growth and spiralling inflation are the other critical challenges facing the Reserve Bank of India (RBI) in the New Year.
 So far this fiscal, bank credit has grown just 7.8 per cent, against 13.6 per cent a year ago and might plunge to a 58-year low of 6.5-7 per cent by March, if the latest projections are anything to go by.
 It was in fiscal 1962 when credit demand was lower than this on record. At that time, it stood at 5.4 per cent.
 Ironically, the more the Reserve Bank of India (RBI) slashed rates, the faster the economy turtled, hitting a 25-quarter low of 4.5 per cent in the September quarter.
 Even as it eased the rates, the RBI slashed growth estimates by an unprecedented 240 basis points since the rate cutting cycle began in February to a low of 5 per cent.
 Similar has been its loss of face on the inflation front, which, after hovering under the glide path for a few years, has suddenly screeched up and is now pegged sharply higher at 5.1-4.7 per cent for 2020.
 Das, who as the economic affairs secretary managed the note ban mayhem with elan both for the government and the RBI, could temper the raising tempers between the central bank and the government, was primarily because he gave in a lot of space to North Block.
 Be it the historic cash transfers by setting up the Bimal Jalan panel in December 2018 itself or taking some of the crippled state-run banks out of the RBI radar or in getting a new NPA framework in place by June 2019 or in opening a special financing window for MSMEs.
 Under his governorship, Das silenced the ever-hungry market and North Block mandarins with 135 basis points reduction in interest rates through five successive rate cuts.
 However, the central bank's youngest Deputy Governor ever -- Viral Acharya -- quit six months before his three-year term was to end in June 2019.
 But those who know Das, including the RBI staff, fully back his working style and glasnost.
 RBI Central Board member Sachin Chaturvedi described Das as a person who brings in pragmatism, commitment, transparency and sincerity to the table.
 "Das has succeeded in getting government and other functionaries together and has made the board a cohesive platform," he told .
 Das also settled the autonomy issue -- most contentious of all -- and had said that so far as decision-making is concerned or taking a final call on any issue, they are taken by the RBI and is more than 100 per cent autonomous in decision-making.
 "Nobody interferes in my decision-making," Das said in September.
 The RBI, under Das, has been instrumental in diversifying liquidity management toolkit by launching the dollar-rupee swap auctions -- buying dollars and releasing equivalent amount of rupees into the system to ease liquidity.
 And the latest in containing rupee volatility and bond spikes are the open market operations twist under which RBI buys and sells equal quantum of gilts.
 Allowing non-residents to participate in rupee interest rate derivatives markets and making NEFT 24x7 and free are among the other decisions this year.
 RBI also put its foot down when it declined to raise the retirement age of private sector bank CEOs from 75 years, refused green-signal to Indiabulls' takeover bid for the crippled Lakshmi Vilas Bank and said no to Uday Kotak's convoluted stake dilution move at Kotak Mahindra Bank. The last matter is now before the Bombay High Court.
 The apex bank also got regulatory powers of the NHB following the crisis at DHFL, also the first non-banking finance company to be referred for insolvency proceedings.
 It also forced banks to link all fresh retail loans to an external benchmark, following which repo rate was made as their benchmark for loan pricing.
 While the RBI should be credited for seeing the slowdown coming and cutting rates, the apparent fault was in not anticipating severity of the economic slump.
 However, the central bank unexpectedly paused rate cuts in December. It indicates the RBI is waiting for the budget on quality of fiscal deficit and quantum of off-balance-sheet borrowings, among others.
 Having worked with three finance ministers, Das also made the long and stormy RBI board meetings into non-events in no time with his consultative process even as he made it clear that the central bank is not a "cheer leader" for anyone.
 All said, it is difficult to say now whether it has been a year of floccinaucinihilipilification or that Das maintained a Panglossian countenance, smiling away at every difficulty.
 Monetary Policy Committee's Chetan Ghate had used the 29-letter word --floccinaucinihilipilification -- which refers to an action of estimating something as worthless.
 The New Year might have a clear if not direct answer to Panglossian ways. BEN HV RAM BAL ANS
ANS

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