RBI MPC Updates: Repo rate unchanged at 6.5%, UPI Lite payment limit raised to ₹500

With the aim to improve the integrity of financial benchmarks, the Reserve Bank on Thursday announced a review of the regulatory framework for financial benchmark administrators.

Governor Shaktikanta Das said the RBI will put in place a comprehensive, risk-based framework for administration of financial benchmarks as part of the review, he added.

The regulations on this regard were issued in June 2019.

Financial benchmark administrators are entities which control creation, operation and administration of benchmarks on prices, rates, indices or values.

The Reserve Bank of India has upwardly revised the country’s retail inflation projections for 2023-24 at 5.4 per cent, against 5.1 per cent it projected in its previous monetary policy meeting in June.

RBI Governor Shaktikanta Das, as part of his remarks after the policy meeting, said assuming a normal monsoon, retail inflation is revised to 5.4 per cent, with Q2 at 6.2 per cent, Q3 at 5.7 per cent and Q4 at 5.2 per cent. Retail inflation for Q1 2024-25 is projected at 5.2 per cent.

“The risks are evenly balanced,” Das said.

The upward revision in the inflation outlook comes after retail inflation in India rose considerably in June to 4.81 per cent, largely due to a sharp spurt in vegetable prices – including tomatoes. Besides vegetables, meat and fish; eggs; pulses and products; spices indices too saw an uptick. Back in May, the retail inflation was at a two-year low of 4.25 per cent. It was at 4.7 per cent in April and 5.7 per cent the previous month.

Reserve Bank on Thursday proposed to increase the per transaction payment limit to ₹500 for UPI Lite in offline mode and announced other measures to further deepen the reach and use of digital payments in the country.

Presently, a limit of ₹200 per transaction and an overall limit of ₹2,000 per payment instrument has been prescribed by the Reserve Bank for small value digital payments in offline mode, including for National Common Mobility Card (NCMC) and UPI Lite.

By removing the need for two-factor authentication for small value transactions, these channels enable faster, reliable, and contactless mode of payments for everyday small value payments, transit payments etc.

The Reserve Bank on Thursday said it will come out with a framework allowing borrowers to switch to fixed interest rate from floating interest rate, a move that would provide relief to borrowers of home, auto and other loans reeling under the impact of high interest rate.

Unveiling the bi-monthly monetary policy, Reserve Bank Governor Shaktikanta Das said under the framework, to be put in place shortly, the lenders will have to clearly communicate with the borrowers about tenor and EMI.

RBI Governor Shaktikanta Das said that the cumulative rate hike of 250 bps from FY23 is working its way through the economy. The repo rate increase cycle was paused in April this year after six consecutive rate hikes aggregating to 250 basis points since May 2022.

Further, RBI Governor Das said that India's strong macroeconomic fundamentals have held to strong growth. He said that India is contributing approx 15% to global growth. "Banks remain healthiest with historic high levels of capital," Governor Das added.

RBI has kept the policy rate unchanged at 6.5% in the recent MPC meet. The inflation may not cause worries (excluding CPI). The CPI forecast for FY24 has raised to 5.4% from 5.1% estimated earlier. Moreover, the real GDP growth forecast was pegged at 6.6%. RBI MPC remains resolute in its commitment to align inflation with the 4% target and anchor inflation expectations, reports MINT

We have 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.

I reiterate our commitment to align CPI inflation to the 4 per cent target on a durable basis. We do look through idiosyncratic shocks, but if such idiosyncrasies show signs of persistence, we have to act, said RBI Governor Shaktikanta Das.

A Public Tech Platform for Frictionless Credit delivery is being developed by the Reserve Bank Innovation Hub.

The Platform is intended to be rolled out as a pilot project in a calibrated manner. It will have an open architecture and open Application Programming Interface (API) and Standards, to which all financial sector players can connect seamlessly.

Amid improving macroeconomic conditions, RBI has so far maintained status quo on the interest rates. Since May 2022, the central bank raised the repo rate by 250 basis points.

The RBI's monetary policy holds significance against the backdrop of the evolving economic landscape, both domestically and globally. It has crucial impact on India's economic recovery, inflation dynamics, and overall financial stability.

The RBI has revised the extant regulatory framework for Infrastructure Debt Funds (IDFs).

The key changes in the revised framework are: (i) withdrawal of the requirement to have a sponsor for the IDFs; (ii) allowing IDFs to finance toll-operate-transfer (ToT) projects as direct lenders; (iii) permitting IDFs to raise funds through ECBs; and (iv) making tri-partite agreements optional for PPP projects.

RBI has proposed to put in place a transparent framework for reset of interest rates on floating interest loans. The framework will require Regulated Entities to (i) clearly communicate with borrowers for resetting the tenor and/or EMI; (ii) provide options for switching to fixed rate loans or foreclosure of loans; (iii) disclose various charges incidental to the exercise of the options; and (iv) ensure proper communication of key information to borrowers.

The Indian equity indices Sensex and Nifty fell over half a percenr each after the RBI kept the repo rate unchanged at 6.5%. RBI Governor Shaktikanta Das retained FY24 GDP growth projections at 6.5%, but raised the CPI inflation forecast for FY24 to 5.4%.

The central bank had hiked the repo rate by 250 basis points to 6.5% between May 2022 and February 2023, the RBI hit a pause in the April review of the monetary policy. A basis point is one-hundredth of a percentage point. The repo rate refers to the rate at which commercial banks borrow money by selling their securities to the Reserve Bank, while the reverse repo rate is the rate at which the central bank borrows money.

These rates are key to boosting credit and investments by businesses to boost economy growth. A hike makes borrowing expensive for businesses, limiting money supply and cooling inflation – the key objective of why banks hike benchmark rates.

Indian financial sector has been stable and resilient as is being reflected in sustained growth numbers: RBI governor.

Governor Shaktikanta Das said the central bank’s successive policy rate hikes, a reference to increases in interest rates, “seems to be working”, after a two-day meeting of the bank’s six-member monetary policy committee.

The monetary policy however remains focussed on “withdrawal of accommodation”, the governor said. In other words, the RBI will be focussed on curbing money supply in the economy to control inflationary pressure.

RBI to allow offline payment of UPI by using near-field communication; raises payment limit via UPI lite to ₹500 from ₹200: Das

RBI governor Shaktikanta Das on Thursday's MPC meeting said that the withdrawal of the ₹2,000 note is a temporary measure. Once the complete withdrawal of ₹2,000 denomination from the country, there will be "adequate liquidity" in the system. Governor Das added.

In May this year, the Reserve Bank of India (RBI) decided to withdraw ₹2,000 denomination banknotes from circulation and said that all the notes must be exchanged before September 30.

The banks will have to maintain an incremental CRR of 10% on the increase in their NDTL between May 19 and July 28, starting fortnight August 12, announced RBI governor Shaktikanta Das.

RBI proposes framework for allowing borrowers to switch to fixed interest rate regime. It is proposed to put in place a transparent system for reset of interest rate on floating interest rate loans

Current Account Deficit to remain imminently manageable in current fiscal aided by services export and high inflow of remittances

Net FDI fell to USD 5.5 billion during April-May compared to USD 10.6 billion in corresponding period last year while, Cash Reserve Ratio (CRR) remains unchanged at 4.5 per cent. 

The CPI inflation for the April-June quarter of 2025 is projected at 5.2%, said RBI governor Shaktikanta Das.

CPI inflation forecast for FY2023-24 has been raised to 5.4% from 5.1%, says RBI governor Shaktikanta Das.

- CPI inflation forecast for Q2FY24 raised to 6.2% from 5.2%

- CPI inflation forecast for Q3FY24 raised to 5.7% from 5.4%

- CPI inflation forecast for Q4FY24 retained at 5.2%

The GDP growth forecast for April-June 2024 is pegged at 6.6%, said RBI governor Shaktikanta Das

Level of surplus liquidity has gone up due to withdrawal of ₹2000 banknotes, and dividend to government, said governor Saktikanta Das.