RBI Monetary Policy in 10 key points: What Governor Shaktikanta Das announced
On June 8, Reserve Bank of India (RBI) Governor Shaktikanta Das announced the results of the June policy meeting,
On June 8, the Reserve Bank of India (RBI) released the results of its June policy meeting, with Governor Shaktikanta Das generally expected to raise the repo rate once more in the fight against surging inflation. Here are the major announcements that Das made.
Repo rate increased
The policy repo rate was raised 50 basis points to 4.90 percent with immediate effect, as expected. As a result, the standing deposit facility (SDF) rate has been changed to 4.65 percent, while the marginal standing facility (MSF) rate has been adjusted to 5.15 percent, and the Bank Rate has been adjusted to 5.15 percent.
Inflation expected to remain high
RBI has increased FY23 consumer price index (CPI) inflation forecast to 6.7 percent from 5.7 percent. Inflation is likely to remain above 6 percent in the first three quarters of the current fiscal. Governor Shaktikanta Das said that the RBI’s steps would be “calibrated, focussed on bringing down inflation to target level".
RBI Monetary Policy Highlights
Limit enhanced for e-mandates on cards for recurring payments
The RBI proposed to enhance the limit for e-mandates on cards from ₹5,000 to ₹15,000 per recurring payment. It further stated that big banks were offering the service, and that transaction volumes were increasing. This framework has registered over 6.25 crore mandates to date, including over 3,400 overseas merchants, the RBI noted.
UPI linked to RuPay Credit Cards
Governor Shaktikanta Das stated during the announcement of the RBI Monetary Policy Meeting that UPI had become the most inclusive means of payment in India, with over 26 crore unique users and 5 crore merchants on board. In May alone, UPI processed 594.63 crore transactions worth ₹10.40 lakh crore. It is proposed that credit cards be linked to UPI in order to expand its reach and usage. To begin, Rupay credit cards will be able to use this feature.
Review of PIDF
The RBI launched the Payments Infrastructure Development Fund (PIDF) Scheme in January 2021 to encourage the development of payment acceptance infrastructure. As of the end of April 2022, the Scheme deployed about 1.18 crore new touch points. It is now suggested to make changes to the PIDF Scheme, including increasing the subsidy amount and streamlining the subsidy claim process, among other things.
Limit enhancement in individual housing loans by cooperative banks
The Tier I/Tier II Urban Co-operative Banks (UCB) limits will be changed from ₹30 lakh/70 lakh to ₹60 lakh/140 lakh, respectively. For Rural Cooperative Banks (RCBs) having an assessed net worth of less than ₹100 crore, the restrictions will increase from ₹20 lakh to ₹50 lakh, and from ₹30 lakh to ₹75 lakh for other RCBs.
RCBs allowed to lend to CRE-RH sector
State Co-operative Banks (StCBs) and District Central Co-operative Banks (DCCBs) are now forbidden from making commercial real estate loans. The RBI has decided to allow StCBs and DCCBs to extend finance to Commercial Real Estate – Residential Housing (CRE-RH) within the existing aggregate housing finance limit of 5 percent of their total assets, in response to the growing demand for affordable housing and to realise their potential in providing credit facilities to the housing sector.
UCBs allowed to offer door-step banking
The RBI has decided to allow UCBs to offer doorstep banking services to its customers on par with scheduled commercial banks in order to achieve regulatory uniformity across REs and to give convenience of banking services to customers at their doorstep.
Global economy struggling
The global economy has been grappling with multi-decadal high inflation and sluggish growth, ongoing geopolitical tensions and sanctions, rising crude oil and other commodity prices, and lingering COVID-19-related supply chain bottlenecks, according to the RBI.
Indian economy recovering
The available data for April-May 2022 indicates a broadening of India's economic recovery, according to RBI Governor Shaktikanta Das. Demand in cities is steadily improving, while demand in rural areas is gradually improving. Merchandise exports posted robust double-digit growth for the fifteenth month in a row during May while non-oil non-gold imports continued to expand at a healthy pace, pointing to recovery of domestic demand.
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