RBI’s 2023 in Review: From stable repo rates to tighter loan norms, 5 key policy changes by Shaktikanta Das & Co
- RBI under the Governor Shaktikanta Das steered a balanced course in 2023 by effectively managing inflationary pressures while maintaining stability in economic growth.
The year 2023 has been noteworthy for the Reserve Bank of India (RBI) and its governor Shaktikanta Das-led Monetary Policy Committee (MPC). Throughout the year, the central bank has effectively managed to temper inflationary pressures while simultaneously sustaining economic growth.
In contrast to the rate hikes witnessed in 2022, the year 2023 has been characterized by a largely stable interest rate environment. With the exception of the February policy, during which the RBI raised the repo rate by 25 basis points (bps) to 6.50%, a rate that has been maintained since, the central bank opted to maintain a consistent stance by holding rates steady in the subsequent five consecutive policy reviews throughout 2023.
This measured approach reflects the RBI's commitment to striking a balance between inflation control and fostering economic growth.
Also Read: Stock market in 2023: Here are 10 key milestones achieved by Indian stock market this year
The central bank also announced a slew of important developmental and regulatory policies this year for the financial sector in the country. Here are top 5 policy announcements by the RBI this year:
Steady repo rates
The RBI began 2023 with an increase in repo rate during its February monetary policy, the first for this calendar year 2023. It hiked the lending rates by 25 bps to 6.50% to counter the surging inflation. This move marked a continuation of the central bank's efforts to curb inflationary trends, with a cumulative increase of 250 basis points in the short-term lending rate since May 2022.
Following the February policy, the RBI maintained a status quo on repo rates in each subsequent monetary policy review. As of the April policy, the repo rate has remained unchanged.
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Tightens rules on personal loans
In November, the RBI tightened norms for personal loans and credit cards in the form of higher capital requirements. The central bank raised the risk weights for lenders and non-bank financial companies (NBFCs) by 25 percentage points to 125% on retail loans.
On credit card exposures, the RBI hiked the risk weights by 25 percentage points to 150% and 125% for banks and NBFCs, respectively. The RBI also asked the banks to set aside additional capital against loans to NBFCs, where the risk weight is currently below 100%.
Tightens norms for investing in AIFs
The RBI in December clamped down on lenders’ evergreening loans through the use of alternative investment funds (AIFs). The RBI barred banks and NBFCs from investing in any scheme of AIFs having investment in companies that have taken loans from the lenders concerned in the past 12 months.
Banks and NBFCs, which are Regulated Entities (RE) under the RBI, make investments in units of AIFs as part of their regular investment operations. It directed lenders that such investments would be required to be liquidated within 30 days.
E-rupee - UPI interoperability
RBI had introduced linking Unified Payment Interface (UPI) with e-rupee wallets issued for people to hold RBI’s central bank digital currency (CBDC). This allowed holders of e-rupees to scan QR codes of the UPI network to make the retail transactions.
Many commercial banks have announced the introduction of the UPI interoperability feature on its Digital Rupee application as a part of the RBI’s CBDC pilot project.
Enhancing UPI transaction limit
To further encourage UPI for medical and educational services, the RBI in December policy proposed to enhance the limit for UPI payments to hospitals and educational institutions from to ₹5 lakh per transaction from ₹1 lakh.
The RBI, under the Governor Shaktikanta Das, steered a balanced course in 2023 by effectively managing inflationary pressures while maintaining stability in economic growth. The central bank introduced significant regulatory reforms, addressing concerns in personal loans, financial markets, fintech sector, payments systems, consumer protection, among many others. These strategic moves underscore the central bank’s commitment to fostering a resilient financial sector.
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Business NewsEconomyRBI’s 2023 in Review: From stable repo rates to tighter loan norms, 5 key policy changes by Shaktikanta Das & Co
First Published:28 Dec 2023, 01:52 PM IST
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