MONETARY POLICY(2022-23)

SUBMITTED BY – ADEEBA NAAZ

ANKIT SINGH
ASTHA AGARWAL
MANIK SHROTRIYA
NEHA SINGH
MONETARY POLICY

Monetary Policy refers to the credit control

measures adopted by the central bank of a
country.
It involves management of money supply and
interest and its demand side economic policy to
achieve objectives like inflation, consumption,
growth and liquidity.
 OBJECTIVES

• Price stability
• High economic growth
• Controlled expansion of bank credit
• Promotion of fixed investments
• Restricting inventories and stocks
• Promote efficiency of the financial system
• Reduce rigidity in financial system
• This monetary policy is aimed at achieving the medium-term target
for consumer price index (CPI) inflation of 4% within a band of +/-
2%, while supporting growth. In line with expectations, the MPC
has continued with its accommodative policy stance – which is
aimed at supporting growth in the wake of the COVID-19
pandemic-led slump. For the purpose, the MPC voted unanimously
in favor of keeping the policy repo rate unchanged.

CPI is a price index ,the price of a

weighted avg market basket of
consumer goods and services
purchased by households.
  Gross domestic product is the standard
measure of the value added created through
Gross domestic product
the production of goods and services in a
country during a certain period.
GDP lowered  GDP lowered to 6.8%(expected-7%)
to 6.8% 2nd Quarter-6.3%
3rd Quarter-4.6%
4th Quarter-4.6%(with risk broadly
balanced)
 SDF is a collateral free liquidity absorption mechanism that
aims to absorb liquidity from the commercial banking system
into the RBI.
Standing deposit facility rate

It gives government securities power to take out extra cash.

Increase in This move is aimed at providing symmetry to the operating

SDF to 5.65% framework of the monetary policy as it introduces an
absorption facility at the bottom of LAF corridor, The interest
rate for SDF has been fixed at 3.75 percent, 25 basis
points lower than the repo rate. The MSF rates continue
to be 25 basis points higher than the policy rate. Thus,
the width of the LAF corridor is restored to the pre-
pandemic pattern of 50 basis points, symmetrically
around the repo rate at the center of the LAF corridor
Marginal standing facility  It is liquidity support provide by RBI to
commercial bank with a higher interest
rate over the repo rate.
Increase in
MSF TO  In this, Bank borrow funds from the RBI
6.15% by pledging government securities.
EX-One day loan, even without eligible
securities.
  Repo rate is the fixed rate at which the Reserve bank provides
overnight liquidity to banks against the collateral of
government and other approved securities under the liquidity
adjustment facility(LAF)
 The Reserve Bank of India (RBI) has announced a 35 bps
hike in repo rate to 6.25 % with immediate effect .The central
Hike in Repo bank has raised its key policy rate as inflation continues to stay
rate to 6.25% above its tolerance band.
 Liquidity has expressed that liquidity has substantially
increased from the market. The loan demand growth and the
current policy rate hike are raising deposit rates. Thus, more
banks are raising more funds for lending. The governor
announced that FY23 GDP growth forecast has retained at
7.2%
  Consumer price index(CPI) remains
above upper tolerance band(4-6%) to
6.7%.
 Following are the effected areas
INFLATION Increase food inflation.
Increase in home loan
High cereal prices
Increase in corporate credit.
  Delayed monsoons withdrawal has
Upside risk to started to impact vegetable prices.
food prices.  Risks to food inflation may
adversely impact inflation
expectations.
  “Rupee is depreciated in an orderly
mannerly.”
Rupee  Indian rupee is depreciated by 7.4%
Depreciation
against USD from 1st April to 28th
Sep.
  Forex reserves are forex currency assets
held by the central banks of countries for
the purpose of making international
payments and hedge against exchange rate
risks.
Forex
 RBI intervenes in the market to curve
“Umbrella”
access volatility and anchor expectations.
 The overall focus is on maintaining
macroeconomics stability.
 Forex reserves umbrella remains strong.
  Held to maturity securities are securities that
companies purchase and intend to hold until
they mature.
 The RBI has also increased the present limit
Held to under the Held to Maturity (HTM) category for
maturity banks from 22% to 23% of NDTL till March
31, 2023. In order to support the government
borrowing program.
 Monetary Policy Instruments – Rates Announced by MPC FY 2022-23

Policy tools Rate before monetary policy Rate after monetary policy Status
2022-23 2022-23

Repo rate 4% 4% Unchanged

Reverse repo rate 3.35% 3.35% Unchanged

Marginal standing 4.25% 4.25% Unchanged

facility(MSF)

Standing deposit facility - 3.75% New tool announced

Bank rate 4.25% 4.25% Unchanged

Cash reserve ratio(CRR) 4.00% 4% Unchanged

Statutory liquidity ratio(SLR) 18% 18% Unchanged

THANK
YOU
-Adeeba Naaz
-Ankit Singh
-Astha Agarawal
-Manik Shrotriya
-Neha Singh