Flow of Goods & Prices
Producer (Producer's Price) → Wholesaler (Wholesale Price) → Retailer (Retail Price) → Consumer (Consumer Price)
Base Year: 2022-23
| Feature | Wholesale Price Index (WPI) | Consumer Price Index (CPI) |
|---|---|---|
| Calculates | Value of Goods only. | Value of Goods & Services. |
| Calculated By | Ministry of Commerce & Industry. | National Statistical Office (NSO). |
WPI Basket (Total Goods: 697)
- Fuel and Power: 16 items
- Primary Goods: 117 items
- Manufactured Goods: 564 items
It is the primary tool used by the Reserve Bank of India (RBI) to control inflation and manage the money supply in the economy.
Composition
The committee has 6 members in total.
- 3 Members from RBI: Governor (Sanjay Malhotra), and two Deputy Governors (Poonam Gupta, Indranil Bhattacharya).
- 3 Members from Government of India (GoI): Ram singh,Nagesh Kumar,Sugata Bhattacharya.
(Note: Member names as provided.)
Meetings
- A minimum of 4 meetings must be held in a year.
- A Bimonthly Review Policy is followed, leading to 6 meetings per year (February, April, June, August, October, December).
- The Quorum for a meeting is 4 persons.
A) Quantitative Tools
Direct:
CRR (Cash Reserve Ratio), SLR (Statutory Liquidity Ratio)
Indirect:
Repo Rate, Reverse Repo Rate, Bank Rate, MSF (Marginal Standing Facility), SDF (Standing Deposit Facility), OMO (Open Market Operations)
B) Qualitative Tools
Change in Marginal Requirement, Rationing of Credit, Moral Suasion.
CRR (Cash Reserve Ratio)
It is the amount of money which a bank is required to maintain with the RBI in the form of cash from its daily Net Demand and Time Liabilities (NDTL).
Current Rate: 4%
Range: 3% to 15%
SLR (Statutory Liquidity Ratio)
It is the amount of money which a bank is required to maintain with itself in the form of gold, cash, or government-approved securities from its daily NDTL.
Current Rate: 18%
Range: 0% to 40%
Repo Rate
It is the rate of interest which RBI charges from its customers (banks) on their short-term loans provided with collateral.
Current Rate: 5.25%
Range: 5% to 9%
Reverse Repo Rate
It is the rate of interest that RBI pays to their customers on their short-term loans (1-12 months) with collateral.
Current Rate: 3.35%
Range: 3.25% to 13.5%
Bank Rate
It is the rate of interest that RBI charges from its customers on their long-term loans (more than 1 year) without collateral.
Current Rate: 5.50%
Range: 5% to 7%
MSF (Marginal Standing Facility)
It is a facility in which a bank can take a loan from the RBI on an overnight basis (or for 1 to 14 days) when it is unable to maintain its CRR or SLR. The loan must be a minimum of ₹1 crore. The interest rate is always 0.25% more than the current repo rate.
Current Rate: 5.50%
Range: 5.25% to 9.25%
SDF (Standing Deposit Facility)
Introduced after demonetisation (8 Nov 2016), it is a facility provided by the RBI to banks where they can deposit their surplus funds with the RBI, and the RBI will pay interest on it.
Current Rate: 5%
Range: 4.75% to 8.75%
OMO (Open Market Operations)
It is a tool where the RBI can buy or sell government securities (which are a promise to buy at face value) on behalf of the GoI to control the money supply and interest rates in the open market.
Change in Marginal Requirement
Margin refers to the amount of a loan which is not financed by the bank. The bank can lower the margin for needed sectors and raise the margin for unneeded sectors to control credit flow.
Rationing of Credit
The RBI sets credit limits on commercial banks for certain sectors to avoid hoarding and ensure equitable distribution of credit.
Moral Suasion
The RBI can use persuasion and pressure to influence the lending policies of commercial banks. It can impose sanctions on any bank that does not follow the guidelines of the Monetary Policy.
1. What is the correct flow of goods and prices in the economy?
2. What is the designated Base Year for the mentioned economic indices?
3. Which of the following indices calculates the value of both goods and services?
4. The Wholesale Price Index (WPI) is calculated by which of the following bodies?
5. The Consumer Price Index (CPI) is calculated by which of the following bodies?
6. What is the total number of goods included in the WPI Basket?
7. How many items in the WPI Basket are categorized under "Fuel and Power"?
8. How many items in the WPI Basket are categorized as "Primary Goods"?
9. Which category holds the largest number of items (564) in the WPI Basket?
10. What is the primary tool used by the RBI to control inflation and manage the money supply?
11. What is the total number of members in the Monetary Policy Committee (MPC)?
12. Who among the following is currently serving as the Governor of the RBI in the MPC?
13. Which two individuals currently serve as the Deputy Governors representing the RBI on the MPC?
14. Who among the following is NOT one of the three members representing the Government of India (GoI) on the MPC?
15. What is the minimum number of meetings the MPC must hold in a single year?
16. Because a Bimonthly Review Policy is followed, how many times does the MPC actually meet in a year?
17. The MPC follows a Bimonthly Review Policy. In which of the following sets of months do these meetings take place?
18. What is the minimum number of persons (Quorum) required for an MPC meeting to proceed?
19. Which of the following pairs represents the "Direct" quantitative tools of Monetary Policy?
20. What does CRR stand for?
21. In what specific form must a bank maintain its CRR with the RBI?
22. What is the permissible range within which the RBI can set the CRR?
23. What is the current rate of the Cash Reserve Ratio (CRR)?
24. Where is a bank required to maintain its Statutory Liquidity Ratio (SLR)?
25. In what forms is a bank permitted to maintain its SLR?
26. What is the current rate and the maximum permissible limit (range) for SLR?
27. What is the Repo Rate?
28. What is the current Repo Rate and its permissible range?
29. What is the term duration for loans taken under the Reverse Repo Rate?
30. What is the current Reverse Repo Rate?
31. How does the Bank Rate differ from the Repo Rate regarding collateral and duration?
32. What is the current Bank Rate?
33. Under the Marginal Standing Facility (MSF), what is the minimum loan amount a bank must take?
34. What is the duration of a loan taken through the MSF?
35. A bank utilizes the MSF specifically when it is unable to maintain which of the following?
36. The interest rate for MSF is always set at a fixed margin above the current repo rate. What is that margin?
37. Given the current Repo Rate (5.25%), what is the current MSF rate?
38. The Standing Deposit Facility (SDF) was introduced immediately following which major economic event?
39. What is the primary function of the Standing Deposit Facility (SDF)?
40. What is the current rate of the SDF?
41. In Open Market Operations (OMO), the RBI buys or sells what instrument on behalf of the GoI?
42. Which of the following is NOT a Qualitative Tool of monetary policy?
43. In the context of the "Change in Marginal Requirement," what does the term "margin" refer to?
44. To restrict credit flow to unneeded sectors, what action will the RBI take regarding the marginal requirement?
45. Which tool involves the RBI setting specific credit limits on commercial banks for certain sectors to avoid hoarding?
46. When the RBI uses persuasion, pressure, or threatens sanctions to influence the lending policies of commercial banks, this is known as: