Editorial Simplified : 7th Day of April 2017

This Series of posts covers the essential Editorial from prominent newspapers. The Editorial from the newspapers are compiled by the Subject Teachers form the Academy and provided in notes format so that the aspirants does not waste their precious time in sifting through the newspapers. 

The Hindu

Editorial : RBI Monetary Policy

Context:

The Monetary Policy Review by the RBI

Important Points:

  • In the monetary policy review announced yesterday, while keeping the monetary policy stance neutral, the RBI has raised the reverse repo rate (the rate at which the RBI borrows money from the banks) by 25 basis points to 6%.
  • This marginal change is aimed at sucking out from the system excess liquidity
  • The RBI has also proposed a new liquidity management tool that awaits government approval, making the draining of surplus liquidity a critical priority all through this year. Its success will, however, depend on the inflationary pressures the economy has to deal with.
  • Improved prospects in the world economy and a discretionary consumer spending at home, the RBI is positive about the growth potential of the economy, projecting it at 7.4% in terms of Gross-Value Added.
  • The RBI Governor, in his address, has cautioned about the following
    • The urgency to resolve the problem of bad loans on the banks’ books
    • The need for more capital for recapitalisation of banks than the allocated Rs 10,000 crore
    • The need and the scope for banks to further cut lending rates
    • The need to eschew loan waivers of the kind just announced in Uttar Pradesh that could crowd out private investments and dent the nation’s balance sheet

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