Moneycontrol PRO
Open App

RBI MPC meet Aug 4-6: What happened at policy meets earlier in 2020

As per the RBI Act 1934, the MPC is required to meet at least four times in a year.

August 06, 2020 / 08:18 AM IST

In the March meeting, the Reserve Bank of India's (RBI) rate-setting Monetary Policy Committee (MPC) slashed policy repo rate by 75 basis points, bringing it down to 4.4 percent from the earlier 5.15 percent.

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.

As per the RBI Act 1934, the MPC is required to meet at least four times in a year. For the financial year 2020-21, the committee was scheduled to meet five times-- June 3-5, August 4-6, September 29-30 to October 1, December 2-4 and February 3-5 2021. However, the June meeting was advanced to May 20-22 in view of the COVID-19 pandemic.

At this off-cycle meet, the MPC decided to bring down repo rate by another 40 percent to 4 percent, while maintaining its accommodative stance.. So basically, the central bank has already slashed policy rates by a good 115 bps this year.

At the time, RBI Governor Shaktikanta Das had said, "There will be a gradual revival of activity and demand by the second half of FY21. MPC (monetary policy committee ) believes it is essential to instil confidence at this point of time."


COVID-19 Vaccine

Frequently Asked Questions

View more
How does a vaccine work?

A vaccine works by mimicking a natural infection. A vaccine not only induces immune response to protect people from any future COVID-19 infection, but also helps quickly build herd immunity to put an end to the pandemic. Herd immunity occurs when a sufficient percentage of a population becomes immune to a disease, making the spread of disease from person to person unlikely. The good news is that SARS-CoV-2 virus has been fairly stable, which increases the viability of a vaccine.

How many types of vaccines are there?

There are broadly four types of vaccine — one, a vaccine based on the whole virus (this could be either inactivated, or an attenuated [weakened] virus vaccine); two, a non-replicating viral vector vaccine that uses a benign virus as vector that carries the antigen of SARS-CoV; three, nucleic-acid vaccines that have genetic material like DNA and RNA of antigens like spike protein given to a person, helping human cells decode genetic material and produce the vaccine; and four, protein subunit vaccine wherein the recombinant proteins of SARS-COV-2 along with an adjuvant (booster) is given as a vaccine.

What does it take to develop a vaccine of this kind?

Vaccine development is a long, complex process. Unlike drugs that are given to people with a diseased, vaccines are given to healthy people and also vulnerable sections such as children, pregnant women and the elderly. So rigorous tests are compulsory. History says that the fastest time it took to develop a vaccine is five years, but it usually takes double or sometimes triple that time.

View more

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. Large banks have transmitted as much as 85 basis points, it added.

The decisions taken by the central bank in May came at a time when global economic activity had remained in standstill under the COVID-19-related lockdowns and social distancing. By this time, India had already been under lockdown for over two months, a factor that had a significant impact on domestic economic activity.

"The MPC is of the view that 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," the committee said in the minutes of its May meeting.
Moneycontrol News
ISO 27001 - BSI Assurance Mark