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RBI’s Monetary Policy (August 05, 2022): In A Nutshell

The bi-monthly monetary policy of Reserve Bank of India (RBI) was announced on August 05, 2022. Here are some of the highlights of the monetary policy announcement.

Rates and reserves

 

 Change Revised rate
Policy repo rate Increase by 50 basis points 5.40%
Standing deposit facility (SDF) rate 5.15%

Marginal standing facility (MSF) rate

 5.65%
Bank rate 5.65%
India’s foreign exchange reserves (as on July 29, 2022)

 

 US$ 573.9 billion

Monetary policy stance

  • Withdrawal of accommodation to ensure that inflation remains within the target going forward, while supporting growth.

Economy 

 

 GDP growth projection CPI inflation projection
FY 2022-23 7.2% 6.7%
Q1 of FY 2022-23 16.2% -
Q2 of FY 2022-23 6.2% 7.1%
Q3 of FY 2022-23 4.1% 6.4%
Q4 of FY 2022-23 4.0% 5.8%
Q1 of FY 2023-24 6.7% 5.0%
  • During the current financial year (up to August 4), the Indian Rupee depreciated by 4.7% against the US dollar – faring much better than several reserve currencies as well as many of its EME and Asian peers. The depreciation of the Indian rupee is more on account of the appreciation of US dollar rather than weakness in macroeconomic fundamentals of the Indian economy. 
  • Net foreign direct investment (FDI) at US$ 13.6 billion in Q1:2022-23 was robust as compared to US$ 11.6 billion in Q1:2021-22. 
  • Foreign portfolio investment, after remaining in exit mode during Q1:2022-23, turned positive in July 2022. 

Other measures

  • Standalone Primary Dealers (SPDs) will be permitted to offer all foreign exchange market-making facilities as currently permitted to Category-I Authorised Dealers, subject to prudential guidelines. 
  • Standalone Primary Dealers (SPDs) will be permitted to undertake transactions in the offshore Rupee Overnight Indexed Swap (OIS) market with non-residents and other market makers. 
  • Bharat Bill Payment System (BBPS), an interoperable platform for standardised bill payments, will be enabled to accept cross-border inward bill payments. This will enable Non-Resident Indians (NRIs) to undertake bill payments for utility, education and other such payments on behalf of their families in India. 
  • Credit Information Companies (CICs) will be included under the Reserve Bank – Integrated Ombudsman Scheme. Further, it will be mandatory for the CICs to have their own internal Ombudsman (IO) framework.
  • A committee will be set up to undertake an in-depth examination of the issues, including the need for transition to an alternative benchmark for MIBOR, and suggest the way forward.
  • A draft Master Direction on Managing Risks and Code of Conduct in Outsourcing of Financial Services will be issued shortly for comments from stakeholders.


References

Reserve Bank of India. (2022, August 05). 'Governor’s Statement'. Retrieved from https://rbi.org.in/Scripts/BS_PressReleaseDisplay.aspx?prid=54150


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