RBI Monetary Policy Notes: The Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) has unanimously decided to keep the repo rate unchanged at 6.5 percent. The MPC also decides to remain focused on the withdrawal of the accommodative stance, Das said while announcing that the RBI MPC meets 2024 decisions.
The repo rate is the interest rate at which RBI lends to other banks. The benchmark interest rate was last raised in February 2023 to 6.5 percent from 6.25 percent.
The RBI holds six bi-monthly meetings in a financial year to consider interest rates, money supply and inflation outlook.
Following Finance Minister Nirmala Sitharaman’s Interim Budget on 1 February 2024, the February MPC has even more significance as it is the final one for the current financial year.
Here are the Top 10 key takeaways from RBI Governor Shaktikanta Das’ speech:
1. India’s potential growth is propelled by structural drivers. Growth is accelerating and exceeding most analysts’ forecasts. Global growth expected to remain steady in 2024, Das said.
2. RBI projects real GDP growth of 7% for FY’25 with risks equally balanced. For FY24Q1 is projected at 7.2%; For FY24Q2 is projected at 6.8%; For FY24Q3 is projected at 7%; For FY24Q4 is projected at 6.9%.
3. Inflation is on a downward trajectory, says RBI Guv. Headline inflation moderated to 5.5% in April-December 2023, from 6.7% in FY23. Headline CPI inflation for FY24 is at 5.4%, with a projection for FY24Q4, the current quarter at 4.5%.
4. Das raised concern about elevated debt. Elevated debt is a serious concern in many countries, it will affect the future global financial system, said Shaktikanta Das. On the domestic economic activity, he added that the momentum remains strong and is expected to continue in FY25.
5. Revision of regulatory framework for electronic trading platforms – A revised regulatory framework for electronic trading platforms will be issued for the comments of stakeholders.
6. Hedging of gold price risk in OTC market in IFSC – Now it is decided to also allow resident entities to hedge the price of gold in the OTC segment in the IFSC.
7. Key Fact Statement for retail & MSME loans and advances – To enhance transparency in disclosure of various loading fees, etc. the RBI has required certain categories of lenders to provide the borrower with a key fact statement (KFS) containing essential information such as all inclusive annual. percentage rate and details of recovery and grievance redressal mechanism. The KFS requirement is now extended to cover all retail and MSME loans.
8. Improvement of AePS- Proposed to simplify the process for onboarding AePS service providers and introduce some additional fraud risk management measures.
9. Principle-based framework for authentication of digital payment transactions- In order to facilitate adoption of alternative authentication mechanisms to strengthen security of digital payments, proposed to establish a principle-based framework for authentication of such transactions.
10. Introduction of programmability and offline functionality in CBDC pilot projects – It is now proposed to enable additional features of programmability and offline capability in CBDC retail payments