The Governor of the Reserve Bank of India, Shaktikanta Das, declared on Friday that the Monetary Policy Committee has opted to maintain the repo rate at 6.50%, marking the fourth consecutive instance of the RBI keeping this key interest rate unchanged. The repo rate signifies the rate at which the RBI lends money to banks. Announcing the bi-monthly monetary policy, Governor Shaktikanta Das said that MPC will remain focussed on withdrawal of accommodation. The Reserve Bank of India (RBI) expects the economy to grow at 6.5% in the fiscal year 2024, indicating confidence in its recovery. Yet, due to a notable increase in vegetable prices, especially tomatoes, the RBI has slightly raised its inflation forecast to 5.4%. This change acknowledges the possibility of prices going up in the short term. To address concerns of borrowers, the RBI has announced steps to enhance transparency in the interest rate reset of EMI-based floating interest loans. Borrowers will now have the option to switch to fixed-rate loans or foreclose existing loans, providing greater flexibility and choice. Embracing technology, the RBI has revealed plans to incorporate artificial intelligence (AI) in UPI payments. Additionally, the deployment of Near Field Communication (NFC) technology in offline payments via UPI Lite is expected to enhance the efficiency and accessibility of digital transactions. Futhermore, RBI has recommended a hike in small-value digital payment limits, elevating the UPI Lite cap from ₹200 to ₹500, to enhance the ease and convenience of digital transactions in line with the increasing preference for cashless transactions. The RBI has instructed banks to set aside 10% of the additional deposits made between May 19 and July 28 as an incremental Cash Reserve Ratio (ICRR) to handle excess liquidity, while maintaining the base Cash Reserve Ratio (CRR) at 4.5% for overall financial system stability. Governor Shaktikanta Das has assured that the current account deficit is projected to remain eminently manageable during FY24. The next meeting of the RBI’s rate-setting panel (MPC) is scheduled for October 4-6, marking a crucial period for monetary policy decisions. The RBI’s comprehensive approach reflects its commitment to navigating economic challenges while fostering innovation and inclusivity in the financial landscape.
