Page 145 - economic_survey_2021-2022

Monetary Management and Financial Intermediation 119

Table 1: Revision in Key Rates set by RBI

Cash Reserve Statutory
Reverse MSF Rate/
Repo Rate Ratio Liquidity Ratio
Effective Date Repo Rate Bank Rate
(per cent) (per cent of (per cent of
(per cent) (per cent)
NDTL) NDTL)
06-02-2020 5.15 4.90 4.0 18.25 5.40

27-03-2020 4.40 4.00 4.0 18.25 4.65
28-03-2020 4.40 4.00 3.0 18.25 4.65
17-04-2020 4.40 3.75 3.0 18.00 4.65

22-05-2020 4.00 3.35 3.0 18.00 4.25
27-03-2021 4.00 3.35 3.5 18.00 4.25
22-05-2021 4.00 3.35 4.0 18.00 4.25

06-08-2021 4.00 3.35 4.0 18.00 4.25
08-10-2021 4.00 3.35 4.0 18.00 4.25
08-12-2021 4.00 3.35 4.0 18.00 4.25

Source: RBI
Note: NDTL: Net Demand and Time Liabilities

4.2 In the initial meetings of 2021-22, MPC noted that while the inflation has hovered above
the upper tolerance band for some months, it was largely driven by adverse supply shocks which
were expected to be transitory. The outlook for aggregate demand was progressively improving
but capacity utilisation rates were low. The contact intensive services were lagging behind and
the recovery was uneven and required policy support. In the latest MPC meeting in December
2021, the committee pointed out that the outlook was uncertain owing to global spillovers,
potential resurgence in COVID-19 infections and divergences in policy actions and stances
across the world with inflationary pressures increasing across economies. Accordingly, the MPC
decided to continue monitoring the inflationary pressures, keep the policy repo rate unchanged
at 4 per cent and persist with the accommodative stance.

4.3 In 2021-22 so far, the overall monetary and credit conditions remained accommodative.
However, the growth rates of monetary aggregates- including Reserve money, Broad money
were lower as compared to the last year. Reserve money (M0) recorded a year-on-year (YoY)
growth of 13 per cent as on 7 January 2022, as compared to 14.3 per cent a year ago. However,
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M0 adjusted for the first-round impact of changes in the Cash Reserve Ratio (CRR) recorded a
lower growth (YoY) of 7.7 per cent, as compared with 18.3 per cent a year ago (Figure 2).

4.4 Expansion in M0 during 2021-22 so far was driven by bankers’ deposits with the RBI
from the component side, with CRR restoration in phases, effective 27 March 2021 and 22 nd
th
May 2021. Currency in Circulation (CIC) grew by 7.8 per cent as on 7 January 2022, lower as
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compared to the previous year as precautionary demand for cash subsided (Table 2).