1.RBI Accommodative Monetary Stance (Monetary Policy)

What & Where
Policy Accommodative stance is an RBI monetary approach to spur activity via low rates and high liquidity
Process Maintains easy credit through repo cuts, OMOs, LTROs, CRR tweaks and guidance to banks
Geography Applied across India during weak growth phases with inflation inside 2-6 % target band
Quick Facts for MCQs
Objectives
- Credit Aim to boost loan availability for private investment
- Borrowing Lower cost of capital to trigger spending by firms and households
- Demand Support aggregate demand revival across stressed sectors
Tools
- Repo Cutting policy repo reduces banks’ funding cost
- Liquidity OMOs and LTROs inject durable and long-term funds
- Reserves CRR reduction frees bank resources for lending
Economic Impact
- Growth Higher consumption and CAPEX lift GDP trajectory
- Assets Excess liquidity can inflate equities and real estate prices
- Inflation Extended accommodation risks price pressures and external value erosion
Key Data Points
| Feature | Data-Point |
|---|---|
| Definition | Expansionary monetary stance with low interest and ample liquidity |
| Adopted when | GDP below potential, inflation subdued or within target |
| Primary authority | RBI Monetary Policy Committee |
| Key rate lever | Repo rate reductions |
| Liquidity levers | OMOs, LTROs, temporary CRR cuts |
| Additional measure | Moral suasion for banks to raise lending |
| Short-term gain | Higher consumption, investment, employment |
| Key risk | Prolonged ease may fuel inflation and rupee weakness |
Related UPSC Prelims PYQs
The lowering of Bank Rate by the Reserve Bank of India leads to
When the Reserve Bank of India reduces the Statutory Liquidity Ratio by 50 basis points, which of the following is likely to happen?





