MPC Meet Highlights: In charting the course of monetary policy, we continuously assess the impact of our past actions, the evolving inflation dynamics and the implications of incoming data for the economic outlook, said Shaktikanta Das, Governor, The Reserve Bank of India (RBI) in conclusion of his monetary policy address on Thursday.
The six-member RBI Monetary Policy Committee has unanimously voted to keep the key policy repo rate unchanged at 6.5%.
“India has made good progress in sustaining India’s growth momentum. While inflation has moderated, the job is still not done. Inflationary risks persist amidst volatile international food and energy prices, lingering geopolitical tensions and weather-related uncertainties,” he said.
From announcing the usual GDP growth, Inflation forcast, SLR, CRR data to laying out additional measures around UPI, Infra-developement funds, KCC-public tech platform , review of existing regulatory frameworks and more, the August MPC meet was action packed.
Here are the ‘Top 10 key takeaways from Shaktikanta Das’ speech’:
# GDP growth projections retained, RBI raises Inflation forecast
The apex bank retained the GDP growth projection for current fiscal year at 6.5 per cent. Real GDP growth for Q1:2024-25 is projected at 6.6 per cent. The risks are evenly balanced, the governor said.
On the other hand, RBI raised the inflation projection marginally to 5.4 per cent from the earlier projection of 5.1 per cent, due to spike in vegetable prices, including tomatoes. According to the governor, the vegetable price shock may reverse quickly, but possible El Nino weather conditions along with global food prices need to be watched closely.
# Surplus liquidity in the system has gone up: Das
The level of surplus liquidity in the system has gone up in the recent months on the back of return of ₹2000 banknotes to the banking system, RBI’s surplus transfer to the government, pick up in government spending and capital inflows, RBI governor said.
The overall daily absorption under the liquidity adjustment facility (LAF) was ₹1.7 lakh crore in June and ₹1.8 lakh crore in July 2023, he added.
# RBI asks banks to temporarily maintain incremental CRR
From August 12, banks will be required to uphold an additional Cash Reserve Ratio (CRR) of 10% on the growth in their Net Demand and Time Liabilities (NDTL) between May 19 and July 28, according to the statement made by Governor Das.
The CRR, which is the cash parked by the banks in their specified current account maintained with RBI, however continues at 4.5 per cent of banks’ deposits.
# Review of regulatory framework for financial benchmark administrators
Its been decided to revise the regulations issued in June 2019 and put in place a comprehensive risk based framework for administration of financial benchmarks.
This will cover all benchmarks related to foreign exchange, money markets, interest rates, govt securities, etc. The directions will provide greater assurance about the accuracy and integrity of financial benchmarks.
# Review of regulatory framework for IDF- NBFCs
The regulations of Infrastructure debt funds (IDFs) have been revised, key changes are withdrawal of the requirement to have a sponsor for the IDFs, allowing the IDFs to finance toll operate transfer projects, permitting IDFs to raise funds through ECDs and making tripartite agreements optional for public-private partnership (PPP) projects.
# More transparent home loan rates reset, EMIs
The Reserve Bank of India (RBI) has directed banks to enhance transparency while adjusting the interest rates and EMIs for floating-rate home loans using the external benchmark-based lending rate mechanism.
Furthermore, the banking regulatory authority has emphasized the necessity for banks to adopt a clear framework for determining the pricing of their floating-rate interest.
Alongside this, the RBI has also mandated lenders to provide borrowers under the EBLR system with the flexibility to transition to a fixed-rate home loan at their discretion.
# RBI to develop public tech platform for frictionless credit delivery
The Reserve Bank of India has stated that a platform for frictionless credit delivery through digital process used in Kisan Credit Card (KCC) will be made available for other loans to deepen financial inclusion.
The public tech platform is intended to be rolled out as a pilot project in a calibrated fashion, both in terms of access to information providers and use cases.
# RBI increases ‘UPI-Lite’ limit, will enable ‘Conversational Payments’
The central bank has announced to enhance the transaction limit for small value digital payments in off-line mode from Rs 200 to Rs 500 within the overall limit of Rs 2000 over ‘UPI Lite‘.
RBI has proposed to enable “Conversational Payments” on UPI by bringing in various parameters over the payment system. Also, the users will be able to make offline payments on UPI using Near Field Communication (NFC) technology through UPI-Lite on-device wallet.
# Net FPI inflows highest since 2014-15
Foreign portfolio investment (FPI) flows have remained buoyant in 2023-24 so far. Net FPI inflows have been US$ 20.1 billion up to August 8, 2023 which is the highest since 2014-15. Net foreign direct investment (FDI) flows to India, on the other hand, fell to US$ 5.5 billion during April-May 2023 from US$ 10.6 billion a year ago, reflecting a global slowdown in FDI flows.
According to the latest data, India’s external debt to GDP ratio improved to 18.9 per cent at end-March 2023 from 20.0 per cent at end-March 2022, he added.
# Indian rupee stable
The Indian rupee has remained stable since January 2023. Foreign exchange reserves have crossed US$ 600 billion mark. The umbrella has gathered further strength; and I am not saying this in the context of the monsoon rains!, said Governor Das.
