Economy
Monetary Policy
Welcome to the comprehensive UPSC study hub on Monetary Policy, a critical pillar of economic governance and an indispensable topic for every serious aspirant. At its core
16 articles in this topic
Articles on Monetary Policy
To stabilise rupee, RBI may use 2013 plan to help banks mop up NRI dollar deposits
Source: The Hindu(Page12) | Syllabus: GS3(Economy
RBI buys ₹50,000 cr. G-Secs for liquidity, tranche 2 on Friday
Source: The Hindu(Page12) | Syllabus: GS3(Economy)
RBI Holds Repo Rate at 5.25 per cent
Context The Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) has decided to keep the repo rate unchanged at 5.25%. More in News The MPC revised GDP growth for FY26 slightly higher to 7.4% (from 7.3%) and retail inflation to 2.1% (from 2%). Inflation trends remain benign, with CPI inflation projected at 4–4.2% in Q1-Q2 FY27, slightly raised due to precious metal prices, while food price deflation continues to keep overall inflation low.
RBI Strengthens Priority Sector Lending (PSL) Oversight
In News The Reserve Bank of India (RBI) issued a comprehensive set of amendments to the Priority Sector Lending (PSL) – Targets and Classification Directions, 2025. About Priority Sector Lending It is an RBI-mandated policy that requires banks to direct a portion of their lending to key development sectors such as agriculture, education, housing, and small industries to support national growth. The latest revision enhances credit flow to key sectors such as Renewable Energy, Social Infrastructur
Rupee’s Depreciation: Global Volatility & Structural Concerns
Context Recent rupee’s depreciation against major currencies like the dollar, euro, and yen signals global volatility and deeper structural concerns. About Rupees Depreciation It refers to the decline in the value of the Indian rupee relative to foreign currencies, particularly the US dollar. It means that more rupees are needed to buy a unit of foreign currency, when the rupee depreciates.
Nine Years After Demonetisation
Context Currency with the public has more than doubled since the demonetisation in 2016 was announced by the government. Demonetisation The Prime Minister announced demonetisation on November 8, 2016. It declared that all existing Rs 500 and Rs 1,000 notes which together accounted for about 86% of the currency in circulation would cease to be legal tender.
RBI Rolled Out Liquidity Measures
In News The Reserve Bank of India (RBI) rolled out a set of liquidity measures designed to make capital more accessible for investors and companies. Key Measures by RBI Acquisition financing: For the first time, banks can now give loans to companies for buying other companies. This allows them to fund mergers, buyouts, and consolidation deals—something banks had been requesting for years.
RBI Holds Repo Rate and Lowers Inflation Forecast
Context The Reserve Bank of India’s (RBI) in its Monetary Policy Committee (MPC) meeting decided to keep the repo rate unchanged at 5.50%. What is the Repo Rate? The repo rate is the rate at which the RBI lends short-term money to commercial banks.
Expansionary Policies in a Slowing Economy
Context India is currently witnessing a rare phase where both fiscal and monetary policies are expansionary. Benefits of Expansionary Policies in India Boosts Aggregate Demand: Expansionary fiscal policies like tax cuts and increased public spending raise disposable incomes and consumption. Similarly, lower interest rates encourage borrowing and investment, helping revive demand across sectors.
Microfinance Loan Delinquencies Jump 163% in FY2025
Context Indias microfinance sector has witnessed a 163% surge to Rs 43,075 crore in loan delinquencies in FY2025. What is Microfinance? Microfinance refers to financial services offered to low-income individuals or groups who are typically excluded from traditional banking.
Revised Economic Capital Framework of the Reserve Bank of India
Context The Board of Directors of Reserve Bank of India (RBI) has approved a record transfer of over 2.68 lakh crore rupees as surplus to the Central government for the financial year 2024-25. About The surplus was calculated under the revised Economic Capital Framework, which now mandates maintaining the Contingent Risk Buffer (CRB) between 5.50 per cent and 7.50 per cent of the central bank’s balance sheet. For 2024-25, the CRB has been increased to 7.50 per cent.
RBI Announces Over US$21 Billion Liquidity Infusion
In response to tight liquidity conditions in the banking system, the Reserve Bank of India (RBI) has announced a liquidity infusion initiative using two Open Market Operations (OMOs) and a USD/INR Buy/Sell Swap auction.
IMF Raised Concerns Related to NBFCs
The International Monetary Fund (IMF) has raised concerns about potential financial instability in India due to the concentrated exposure of Non-Banking Financial Companies (NBFCs) to the power and infrastructure sector.
Capital Account Convertibility
The Chairman of the 16th Finance Commission, Arvind Panagariya, said that India should not rush into full capital account convertibility at its current per capita income level.
Daily Editorial Analysis - 16th November 2024
This daily editorial analysis covers India's unexpected retail inflation surge (CPI) and the ongoing ethnic violence in Manipur. Both topics are critical for UPSC and State PCS exams, impacting India's economy, governance, and social stability.
Daily Editorial Analysis -14th November 2024
India faces an unexpected retail inflation surge to 6.2% driven by food prices, challenging RBI's monetary policy. Concurrently, the Manipur crisis demands urgent central government intervention to address ethnic violence, humanitarian issues, and governance failures.