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RBI’s Monetary Policy (April 08, 2022): In A Nutshell

The first bi-monthly monetary policy of RBI for the year 2022-23 was announced on April 08, 2022.

Monetary policy stance

  • Remains accommodative while focusing on withdrawal of accommodation to ensure that inflation remains within the target going forward, while supporting growth. 

Rates

  • Policy repo rate kept unchanged at 4%.
  • The amendment to Section 17 of RBI Act in 2018 empowered RBI to introduce Standing Deposit Facility (SDF). The SDF will replace the fixed rate reverse repo (FRRR) as the floor of the LAF corridor.
  • SDF rate will be 25 bps below the policy rate and MSF rate will continue to be 25 bps above the policy repo rate. Thus, the width of the LAF corridor is restored to the pre-pandemic configuration of 50 bps. 
  • Marginal standing facility (MSF) rate and Bank rate remain unchanged at 4.25%.
  • Standing deposit facility (SDF) rate will be at 3.75%. 
  • The fixed rate reverse repo (FRRR) rate is retained at 3.35% and its operation will be at the discretion of RBI for purposes specified from time to time. 
  • Both MSF and SDF will be available on all days of the week, throughout the year.

Economy

  • According to the second advance estimates released by National Statistical Office (NSO) on February 28, 2022, real GDP rose by 8.9% in 2021-22. 
  • Real GDP growth for 2022-23 is projected at 7.2% with Q1:2022-23 at 16.2%; Q2 at 6.2%; Q3 at 4.1%; and Q4 at 4.0%, assuming crude oil (Indian basket) at US$ 100 per barrel during 2022-23.
  • On the assumption of a normal monsoon in 2022 and average crude oil price (Indian basket) of US $ 100 per barrel, inflation is projected at 5.7% in 2022-23, with Q1 at 6.3%; Q2 at 5.8%; Q3 at 5.4%; and Q4 at 5.1%.
  • Foreign exchange reserves of India stand at US$ 606.5 billion as on April 1, 2022.

Other measures

  • The opening time for financial markets regulated by RBI, will be restored to the pre-pandemic timing of 9:00 am with effect from April 18, 2022, without any change in their closing time prevailing at present.
  • The excess liquidity in the market caused by the various liquidity measures taken by RBI during the pandemic, will be withdrawn by RBI in a gradual and calibrated manner over a multi-year time frame beginning this year.
  • The risk weights for individual housing loans were rationalised in October 2020 by linking them only with loan to value (LTV) ratios for all new housing loans sanctioned up to March 31, 2022. The applicability of these guidelines will be extended till March 31, 2023.
  • The present limit under Held to Maturity (HTM) category will be enhanced from 22% to 23% of NDTL till March 31, 2023 and banks will be allowed to include eligible SLR securities acquired between April 1, 2022 and March 31, 2023 under this enhanced limit. The HTM limits would be restored from 23% to 19.5% in a phased manner starting from the quarter ending June 30, 2023.
  • To facilitate better understanding and assessment of the potential impact of climate-related financial risks by Regulated Entities, a Discussion Paper on Climate Risk and Sustainable Finance will be published shortly for feedback.

Proposed measures / initiatives

  • Setting up a committee to examine and review the current state of customer service in RBI Regulated Entities, adequacy of customer service regulations and suggest measure to improve the same.
  • Making the card-less cash withdrawal facility available across all banks and ATM networks using the UPI. 
  • Reducing the net worth requirement of non-bank Bharat Bill Payment Operating Units under Bharat Bill Payment System (BBPS) from ₹100 crore to ₹25 crore.
  • Issuing guidelines on Cyber Resilience and Payment Security Controls for Payment System Operators.


References

Reserve Bank of India. (2022, April 08). 'Governor’s Statement: April 8, 2022'. Retrieved from https://www.rbi.org.in/Scripts/BS_PressReleaseDisplay.aspx?prid=53535


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