The Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) voted on Friday to raise the repo rate by 50 basis points (bps) to 5.9 percent with immediate effect while maintaining the stance of “removal of accommodation.” It has reduced its FY23 GDP growth forecast from 7.2 percent to 7%. The central bank, on the other hand, has maintained its 6.7 percent retail inflation forecast for FY23.Key RBI decisions in this case.
On Friday, the RBI raised the repo rate by 50 basis points to 5.9 percent, the fourth increase in a row. The RBI’s rate-setting panel has raised 190 basis points in the four subsequent monetary policy reviews since May of this year. The rate at which the Reserve Bank of India lends money to commercial banks is called the repo rate.
“The world has been confronted with one crisis after another,” RBI Governor Shaktikanta Das remarked while presenting the current bi-monthly monetary policy statement. We are currently in the midst of yet another storm of global monetary Das remarked while presenting the current bi-monthly monetary policy statement. We are currently in the midst of yet another storm of global monetary tightening.”.
The RBI reduced its FY23 GDP prediction to 7% from 7.25% previously. In the June 2022 quarter, India’s GDP increased by 13.5%. “Prolonged geopolitical tensions, tightening global financial conditions, and a possible drop in the external part of aggregate demand can be headwinds for growth,” Das said.”.
Taking these considerations into account, he continued, real GDP growth for 2022–23 is predicted at 7%, with the second quarter at 6.3%, the third quarter at 4.6%, and the fourth quarter at 4.6%, with risks fairly balanced. The growth rate for Q1: 2023–24 is anticipated to be 7.2%.
Das stated that the standards for regional rural banks to provide customers with online banking services are being streamlined. “The new recommendations will be made available separately.”.
RRBs are currently permitted to offer online banking to their customers, subject to certain criteria being met. The RBI governor stated that offline payment aggregators will now be subject to RBI regulations to achieve regulatory synergy and data standard convergence.
Since March 2020, online payment aggregators (PAs) have been subject to RBI regulations. It is now proposed that these requirements be extended to offline PAs who handle proximity/face-to-face transactions, as well.” Das stated.
RBI Governor Shaktikanta Das said that the central bank will make a discussion paper about the proposed transition so that stakeholders can give feedback. This is a step toward getting prudential standards that are accepted around the world.
He stated that banks now use the incurred loss technique for provisioning on loan assets, in which provisions are made after the stress has materialized. The expected loss-based method, which requires banks to make provisions based on an estimate of possible losses, is a more responsible and forward-looking strategy.
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