The RBI’s Monetary Policy Committee on Thursday, February 8, decided to keep the key repo rate unchanged for the sixth consecutive time at 6.5 per cent having a stance with the focus on the withdrawal of accommodation. It kept the FY24 inflation forecast unchanged at 5.4 per cent, and maintained the status quo on the FY24 GDP projection at 7 per cent. The RBI also proposed to take other measures. Here are the top decisions of the RBI on Thursday:
Repo Rate, SDF, MSF Unchanged
The RBI MPC decided to keep the repo rate unchanged for the sixth time in a row, at 6.5 per cent. The decision has been taken with 5 members in favour of the decision out of the total 6. The policy stance continues to be ‘withdrawal of accommodation’.
The RBI MPC also kept the SDF unchanged at 6.25 per cent, and MSF and Bank Rates maintained at 6.75 per cent. The SDF is the lower band of the interest rate corridor, while the MSF is the upper band.
FY24 Inflation Forecast Kept Unchanged At 5.4%
The RBI has also kept the inflation forecast unchanged at 5.4 per cent for 2023-24.
“Adverse weather events remain the primary risk with implications for the rabi crop. Increasing geopolitical tensions are leading to supply chain disruptions and price volatility in key commodities, particularly crude oil. On the positive side, the progress in rabi sowing has been satisfactory and augurs well for the season. Prices of key vegetables, especially onions and tomatoes, are registering seasonal price correction,” Das said.
Taking into account these factors, CPI inflation is projected at 5.4 per cent for the current year (2023-24) with Q4 at 5.0 per cent. Assuming a normal monsoon next year, CPI inflation for 2024- 25 is projected at 4.5 per cent with Q1 at 5.0 per cent; Q2 at 4.0 per cent; Q3 at 4.6 per cent; and Q4 at 4.7 per cent, he added.
FY24 GDP Forecast Unchanged At 7%
The RBI has kept the FY24 GDP projection unchanged at 7 per cent.
“Domestic economic activity remains strong. The first advance estimates (FAE) placed the real gross domestic product (GDP) growth at 7.3 per cent for 2023-24, marking the third successive year of growth above 7 per cent,” the RBI governor said.
Going forward, the momentum of economic activity witnessed during 2023-24 is expected to continue in the next year (2024-25), he said.
Key Fact Statement for Retail and MSME Loans & Advances
To enhance transparency on loan information for borrowers in key facts statement (KFS), the Reserve Bank of India (RBI) on Thursday said loan processing fees, documentation fees, and other charges need to be loaded into the actual interest rates. RBI Governor Shaktikanta Das said this will provide customers with a clear idea of the actual annualised interest rate they pay on the loan.
Review of the Regulatory Framework for Electronic Trading Platforms
The Reserve Bank’s extant regulatory framework for electronic trading platforms (ETPs) was issued in 2018. In view of the subsequent developments in markets, products, and technology, etc., a revised regulatory framework for ETPs will be issued for stakeholders’ feedback.
Hedging of Gold Price Risk in Over-the-Counter Market In IFSC
In December 2022, the Reserve Bank had permitted resident entities to hedge their gold price risk in recognised exchanges in the IFSC. It has now been decided to also allow resident entities to hedge the price of gold in the over the counter (OTC) segment in the IFSC.
This will provide more flexibility to resident entities in hedging their exposure to gold prices.
Aadhaar-Enabled Payment System
Aadhaar-Enabled Payment System (AePS) has played an important role in financial inclusion by enabling customers to make digital payment transactions through service providers such as business correspondents.
“Given their significance, it is proposed to streamline the process for on-boarding of AePS service providers and introduce some additional fraud risk management measures. These measures will further strengthen the security of the AePS system and enhance its robustness,” Das said.
Framework for Authentication of Digital Payment Transactions
To facilitate adoption of alternative authentication mechanisms for enhancing the security of digital payments, the RBI proposes to put in place a principle-based framework for authentication of such transactions.
Central Bank Digital Currency
The CBDC Retail (CBDC-R) pilot currently enables Person to Person (P2P) and Person to Merchant (P2M) transactions. It is now proposed to enable additional functionalities of programmability and offline capability in CBDC retail payments.
Programmability will facilitate transactions for specific/targeted purposes, while offline functionality will enable these transactions in areas with poor or limited internet connectivity.
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