The Reserve Bank of India’s Monetary Policy Committee decided on Thursday, February 8, to keep the key repo rate unchanged at 6.5% for the sixth consecutive time, with the focus of the stance being on exiting easing policy. It kept its fiscal 2024 inflation forecast unchanged at 5.4% and its fiscal 2024 GDP forecast unchanged at 7%. The RBI also proposed other measures. The following are the top decisions of the Reserve Bank of India on Thursday:

Repo rate, SDF, MSF unchanged

The Monetary Policy Committee of the Reserve Bank of India decided to keep the repo rate unchanged for the sixth consecutive time at 6.5%. The decision was taken with 5 out of 6 members in favor of the decision. The policy stance remains “withdrawal of accommodation.”

The Reserve Bank of India’s Monetary Policy Committee also kept the SDF rate unchanged at 6.25% and the MSF and bank rates at 6.75%. SDF is the lower bound of the interest rate corridor, while MSF is the upper bound of the interest rate corridor.

Inflation forecast for fiscal year 2024 remains unchanged at 5.4%

The Reserve Bank of India also kept its inflation forecast unchanged at 5.4% for 2023-24.

“Adverse weather events remain a major risk affecting rabi crops. Heightened geopolitical tensions have led to supply chain disruptions and price volatility for major commodities, especially crude oil. On the positive side, Rabi sowing is progressing satisfactorily, This augurs well for the current season. Prices of major vegetables, especially onions and tomatoes, are witnessing seasonal price correction,” Das said.

Taking these factors into account, CPI inflation is expected to be 5.4% this year (2023-24) and 5.0% in the fourth quarter. Assuming a normal monsoon next year, the CPI inflation rate in 2024-25 is expected to be 4.5%, including 5.0% in the first quarter; 4.0% in the second quarter; 4.6% in the third quarter; and 4.7% in the fourth quarter, he added.

GDP forecast for fiscal year 2024 remains unchanged at 7%

The Reserve Bank of India kept its GDP forecast for fiscal 2024 unchanged at 7%.

“Domestic economic activity remains strong. The first advance estimate (FAE) puts real gross domestic product (GDP) growth in 2023-24 at 7.3%, marking the third consecutive year of growth above 7%.”

Going forward, the momentum in economic activity during 2023-24 is expected to continue next year (2024-25), he said.

Statement of Key Facts on Retail and MSME Loans and Advances

The Reserve Bank of India (RBI) on Thursday said that to improve transparency of borrower loan information in the Key Fact Statement (KFS), loan processing charges, documentation fees and other charges need to be factored into the effective interest rate. Reserve Bank of India Governor Shaktikanta Das said this will give customers a clear idea of ​​the actual annualized interest rate they are paying on their loans.

Review of the regulatory framework of electronic trading platforms

The Reserve Bank’s current Electronic Trading Platform (ETP) regulatory framework was published in 2018. In view of subsequent market, product and technology developments, a revised ETP regulatory framework will be released to solicit feedback from stakeholders.

IFSC OTC market gold price risk hedging

In December 2022, the Reserve Bank allowed resident entities to hedge gold price risk on exchanges recognized by the IFSC. It has now been decided to also allow resident entities to hedge gold prices in the over-the-counter (OTC) segment of the IFSC.

This will provide resident entities with greater flexibility in hedging gold price risk.

Aadhaar-enabled payment system

Aadhaar-enabled payment system (AePS) plays an important role in financial inclusion by enabling customers to conduct digital payment transactions through service providers such as business correspondents.

“Given its importance, it is recommended to simplify the onboarding process for AePS service providers and introduce some additional fraud risk management measures. These measures will further strengthen the security of the AePS system and enhance its robustness,” said Das.

Digital payment transaction authentication framework

To promote the adoption of alternative authentication mechanisms to enhance the security of digital payments, the Reserve Bank of India has proposed a principles-based framework for authentication of such transactions.

central bank digital currency

The CBDC-Retail (CBDC-R) pilot currently supports person-to-person (P2P) and person-to-merchant (P2M) transactions. It is now proposed to enable additional programmability and offline functionality in CBDC retail payments.

Programmability will facilitate transactions for specific/targeted purposes, while offline functionality will enable these transactions to take place in areas with poor or limited internet connectivity.