“Accommodative stance” is a commonly used term by the Reserve Bank of India in its Monetary Policy. It means that the Central Bank would bring down policy rates (Repo, Reverse Repo) thereby increasing the money supply in the economy. It is done to inject liquidity into the system.
This stance is applied to increase the money supply and boost the economy.
- Reserve Bank adopts the “Accommodative stance” mode when it decides to pursue an Easy Money / Expansionary Money Policy.
- Since the Monetary Policy Committee of the RBI has the mandate to keep the inflations levels in 2-6% band width, the central bank in order to curtail inflation adopts a calibrated tightening stance and in order to increase inflation adopts an accommodative stance.
- As opposed to the “Accommodative stance”, the “Calibrated Tightening” decreased the money supply in the system by increasing the policy rates.
Sixth bi-monthly Policy review meeting
The Reserve Bank of India has kept all the policy rates unchanged in the sixth bi-monthly monetary policy committee review meeting. The committee has also agreed to keep an accommodative stance in order to boost the recovery of economic indicators. This was the consecutive third time that the policy rates have been kept the policy rates unchanged.
Current Policy Rates
At present, the policy rates are as follows-
Repo Rate- 4%
Reverse Repo Rate- 3.35%
Marginal Standing Facility- 4.25%
Bank Rate- 4.25%
Other Monetary Policy Stances
In addition to the accommodative stance, there are other stances also like neutral stance, hawk stance, and dovish stance. Hawk stance is characterized by high-interest rates thereby less liquidity in the market. The dovish stance is a somewhat softer stance than the hawk. During this stance, interest rates are low. In a neutral stance, as the name suggests the interest rates are neither high nor low.
Written by IAS POINT