Rbi needs to watch out for threats to financial stability
The unsurprising aspect of the Reserve Bank of India’s Monetary Policy Committee meeting was the decision to keep the policy rate, or repo, unchanged at 4%. The MPC also said the current accommodative liquidity policy will continue to help revive growth.The most significant change in the MPC’s statement is the increase in its inflation projections. Now, it is forecast to be 5.7% for 2021-22. Just three months ago, it was forecast to be 4.9%. The MPC believes the rise in the general level of prices is transitory, caused by supply disruptions on account of the pandemic. The MPC also retained its GDP forecast for 2021-22 at 9.5%.
The additional risk emerges from the fact that bank deposits, the favourite financial asset of Indian households, are likely to provide negative returns across almost all maturities. The MPC is also unlikely to increase the repo as boosting economic growth is the priority. This is the context in which financial instability can arise as households may underestimate risks in the search for yields that are higher than what bank deposits offer. The central bank needs to be alive to this possibility.
Stay updated with The Hindu Editorial Vocab24 app, your definitive source for breaking news and comprehensive coverage from India and around the globe. Whether it's political developments, business updates, sports highlights, the latest technology trends, or current events, The Hindu brings live, accurate, and reliable news directly to your device.
Don’t fall for sensationalized or fake news shared online. Read and share accurate updates with friends and family through The Hindu Editorial Vocab24 app. Download it today!
News Coverage in The Hindu Editorial Vocab24 App
Breaking News: Receive instant notifications on breaking news stories as they unfold. Stay informed about major events and developments in India and around the world with live blogs, news in shorts videos, and concise articles.
Politics: Get the latest updates on Indian politics, including elections, policy changes, government decisions, and political events that shape the nation.
Business and Economy: Stay ahead in the economic landscape with detailed business news and market analysis. Learn about stock market trends, financial reports, corporate news, and economic developments to make informed investment decisions.
Current Events: Follow stories on social issues, policy changes, global events, and daily current affairs, tailored for UPSC and other competitive exam preparations.
Technology: Keep up with the latest gadgets, innovations, and tech trends. Read expert reviews and analyses in short, concise updates on cutting-edge technology from India and beyond.
Sports: Never miss a moment of your favorite sports. Get live scores, match reports, and expert analysis on cricket, football, tennis, and more.
International News: Stay informed about global events and geopolitical developments, including the Russia-Ukraine war, Israel-Palestine conflict, and other key international stories.
Local News: Stay connected to your community with the latest updates on city events, issues, and local news. Coverage includes hyperlocal updates from cities like Bangalore, Chennai, Delhi, Hyderabad, Mumbai, Kolkata, and more.
Trending Topics: Discover what's trending today with the most talked-about stories and hot topics across India and the world.
Experience journalism that values integrity, accuracy, and reliability. Download The Hindu Editorial Vocab24 app today and stay connected with the world.
Subscribe to our newsletter!
