RBI MPC Highlights: The Reserve Bank of India (RBI) has identified high inflation as a major risk to macroeconomic stability and sustainable growth.
After detailed assessment of the evolving financial developments, the six-member monetary policy committee (MPC) has decided unanimously to keep the policy repo rate unchanged at 6.5 per cent for the fourth consecutive time.
Announcing the bi-monthly monetary policy, RBI Governor Shaktikanta Das said that the MPC remains highly alert and prepared to undertake timely policy measures, as may be necessary, in order to align inflation to the target and anchor inflation expectations.
Global economy is slowing due to tight financial conditions. Global trade is contracting, Governor Das said while adding that tight monetary policies by Central banks could persist for longer.
From announcing the usual GDP growth, Inflation forecast data to laying out additional measures, here are the ‘Top 10 RBI Monetary Policy Updates for October 2023″:
1) RBI maintains status quo, keeps repo rate unchanged at 6.5%. MPC also decided by 5-1 vote to remain focussed on withdrawal of accommodation. The standing deposit facility (SDF) rate remains unchanged at 6.25% and the marginal standing facility (MSF) rate and the Bank Rate at 6.75 per cent.
2) The overall inflation outlook is clouded by uncertainties by fall in khariff sowing, lower reserve oil levels and volatile global food and energy prices, said Das. Given this, CPI inflation is projected at 5.4 per cent for 2023-24, with Q2 at 6.4 per cent, Q3 at 5.6 per cent and Q4 at 5.2 per cent with risks evenly balanced. CPI inflation for Q1:2024-25 is projected at 5.2 per cent
3) FY 24 real GDP growth maintained at 6.5%, while GDP for Q1 FY25 is forecasted at 6.6%. RBI said that the banking system continues to be resilient. Financial indicators of NBFCs are in line with the banking system, as per the latest data in June.
4) ICRR impounded Rs 1.1 lakh crore from the banking system. It is being phased out tomorrow, the Governor said. RBI expects ease in liquidity conditions on the back of release of the remaining impounded I-CRR funds and pickup in government spending. Whereas increase in currency demand due to festival season may act as a counterbalancing factor. RBI may have to consider OMO-sales (Open Market Operation sales) to manage liquidity, consistent with the stance of monetary policy. The timing and quantum of such operations will depend on the evolving liquidity conditions, he added.
5) Net FPI inflows at US$ 20.3 billion up to September 2023 as against net outflows in the preceding two years. Net FDI moderated to US$ 5.8 billion in April-July 2023 from US$ 17.3 billion a year ago. On the remittances front, the rise of 5.8% YoY in Q1 FY24 was registered, whereas the current account deficit declined to 1.1% of GDP. The foreign exchange reserves grew by a net $24.4 bn. A turnaround was witnessed in inflows under external commercial borrowing, with $4.5 billion in Apr-Aug.
Also Read: What is the rationale behind RBI MPC keeping repo rates unchanged for fourth time?
6) Prudential framework for income recognition, asset classification and provisioning pertaining to advances particularly in the context of projects under implementation. A comprehensive regulatory framework applicable for all regulated entities is now proposed to be issued. Detailed draft guidelines will be released
7) With a view to harmonize the credit concentration norms among the NBFCs it has been decided to permit NBFCs in the middle and base layers to use the credit risk mitigation instruments for reducing their counterpart exposures under the the credit concentration norms, Das said.
8) The next announcement relates to the gold loan bullet repayment scheme in respect of the urban cooperative banks. It has been decided to increase the existing limit for gold loans under the bullet repayment scheme from Rs 2 lakh to Rs 4 lakh in respect of Urban cooperative banks who have met the overall targets and sub targets under the priority sector lending as of 31st March 2023.
9) It has been decided to issue a draft omnibus framework for recognising the self regulatory organizations (SROs) for various categories of regulated entities of the Reserve Bank. These draft guidelines will be issued for stakeholders comments.
10) RBI is extending the coverage of payments infrastructure development fund scheme and including the Prime Minister’s Vishwakarma scheme’s beneficiaries also. It has been decided to extend the scheme by 2 years, to 2025.
