Skip to main content

RBI’s Monetary Policy (September 30, 2022): In A Nutshell

The bi-monthly monetary policy of Reserve Bank of India (RBI) was announced on September 30, 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 5.90%
Standing deposit facility (SDF) rate 5.65%
Marginal standing facility (MSF) rate 6.15%
Bank rate 6.15%
India’s foreign exchange reserves (as on September 23, 2022)

 

 US$ 537.5 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 7.0% 6.7%
Q2 of FY 2022-23 6.3% 7.1%
Q3 of FY 2022-23 4.6% 6.5%
Q4 of FY 2022-23 4.6% 5.8%
Q1 of FY 2023-24 7.2% 5.0%

  • The real GDP grew by 13.5% (y-o-y) in Q1:2022-23, surpassing the pre-pandemic level by 3.8%.
  • Inflation inched up to 7.0% in August from 6.7% in July.
  • During the current financial year (up to September 28), the US dollar has appreciated by 14.5% against a basket of major currencies. However, the Indian Rupee (INR) has depreciated by 7.4% against the US dollar during the same period - faring much better than several reserve currencies as well as many of its Emerging Market Economies (EME) and Asian peers.
  • The current account deficit (CAD) for Q1:2022-23 is placed at 2.8% of GDP with trade deficit at 8.1% of GDP. 
  • About 67% of the decline in reserves during the current financial year is due to valuation changes arising from an appreciating US dollar and higher US bond yields.

Other measures

  • Banks currently follow the incurred loss approach whereby provisions on loan assets are made after the stress has materialised. A more prudent and forward-looking approach is the expected loss-based approach, which requires banks to make provisions based on an assessment of probable losses. RBI will issue a discussion paper on the proposed transition for stakeholder comments.
  • The revised framework for securitisation of standard assets was issued by RBI in September 2021. A framework for securitisation of stressed assets will be introduced to provide an alternative mechanism for securitisation of NPAs, in addition to the existing ARC route. A discussion paper on the proposed framework is issued for feedback from stakeholders.
  • Regional Rural Banks (RRBs) are currently allowed to provide Internet Banking facility to their customers, subject to fulfilment of certain criteria. To promote the spread of digital banking in rural areas, these criteria have been rationalised.
  • Online Payment Aggregators (PAs) have been brought under the purview of RBI regulations since March 2020. These regulations are proposed to be extended to offline PAs, who handle proximity / face-to-face transactions.


References

Reserve Bank of India. (2022, September 30). 'Governor’s Statement'. Retrieved from https://rbi.org.in/Scripts/BS_PressReleaseDisplay.aspx?prid=54464


Follow at - Telegram   Instagram   LinkedIn   Twitter

Labels:

Comments

Post a Comment

Popular Posts

Report of the Committee to develop a Framework for Responsible and Ethical Enablement of Artificial Intelligence (FREE-AI) in the Financial Sector

Reserve Bank of India (RBI) has released the report of the committee to develop a framework for responsible and ethical enablement of artificial intelligence (FREE-AI) in the financial sector. Committee to develop a Framework for Responsible and Ethical Enablement of Artificial Intelligence (FREE-AI) in the Financial Sector In the financial sector, Artificial Intelligence (AI) has the potential to unlock new forms of customer engagement, enable alternate approaches to credit assessment, risk monitoring, fraud detection, and offer new supervisory tools. At the same time, increased adoption of AI could lead to new risks like bias and lack of explainability, as well as amplifying existing challenges to data protection, cybersecurity, among others. To encourage the responsible and ethical adoption of AI in the financial sector, the committee to develop a Framework for Responsible and Ethical Enablement of Artificial Intelligence (FREE-AI) in the Financial Sector (Chairperson: Dr. Pushpak B...
Post a Comment
Read more

Continuous Clearing and Settlement on Realisation in Cheque Truncation System (CTS)

Reserve Bank of India (RBI) has issued direction on continuous clearing and settlement on realisation in Cheque Truncation System (CTS). What is Cheque Truncation System (CTS)? Cheque Truncation System (CTS) involves halting the physical movement of the cheque and its replacement by images of the instrument and the corresponding data contained in the MICR line.  In CTS, 3 images are taken of each cheque – front Gray Scale, front Black & White and back Black & White. MICR (Magnetic Ink Character Recognition) is a 9-digit code printed at the bottom of cheques using magnetic ink – first 3 digits indicate City Code, middle 3 digits indicate Bank Code and the last 3 digits indicate Bank Branch Code. Only CTS-2010 standards compliant instruments can be presented for clearing through CTS. The presenting banks which truncates the cheques need to preserve the physical instruments for 10 years. From when will the continuous clearing and settlement on realisation in CTS be implemented...
Post a Comment
Read more

What is KYC?

Be it opening a new bank account, applying for a new credit card, registering for new e-wallet, or any other account or facility involving financial matters, the application process is incomplete until KYC is done.  What is KYC? KYC or Know Your Customer is a process of customer identification and verification while opening an account or undertaking a financial transaction. Why is KYC process needed? To prevent money laundering To combat financing of terrorism What is verified under KYC? The banks / financial institutions collect the relevant documents from the customers to verify the following – Proof of identity Proof of address Which documents can be collected for KYC? As per RBI’s Master Direction - Know Your Customer (KYC) Direction, 2016 (Updated as on May 10, 2021), “Officially Valid Document” (OVD) means – Passport Driving licence Proof of possession of Aadhaar number Voter's Identity Card issued by the Election Commission of India Job card issued by NREGA duly signed by an...
Post a Comment
Read more

Investments in Debt Instruments by Non-residents

Reserve Bank of India (RBI) has issued directions on investments in debt instruments by non-residents. What are the channels for investments in debt instruments by non-residents? General Route – for investment in Government securities and corporate debt securities by Foreign Portfolio Investors (FPIs) subject to specified investment limits and macro-prudential limits. Voluntary Retention Route (VRR) – for investments in Government securities and corporate debt securities, free of certain macro-prudential limits applicable to FPI investments in debt markets under the General Route, by FPIs that commit to remain invested for a stipulated retention period. Fully Accessible Route (FAR) – for investments by non-residents in certain specified categories of Central Government securities (‘specified securities’) without any restriction. Scheme for Trading and Settlement of Sovereign Green Bonds (SGrBs) issued by the Central Government by eligible foreign investors in the International Finan...
Post a Comment
Read more

Non-Fund Based Credit Facilities

Reserve Bank of India (RBI) has issued directions on non-fund based credit facilities. To whom shall the directions be applicable? The directions shall apply to the following Regulated Entities (REs) for all their Non-Fund Based (NFB) exposures such as guarantee, letter of credit, co-acceptance etc. Commercial Banks (including Regional Rural Banks and Local Area Banks) Primary (Urban) Co-operative Banks (UCBs) / State Co-operative Banks (StCBs) / Central Co-operative Banks (CCBs) All India Financial Institutions (AIFIs) Non-Banking Financial Companies (NBFCs) including Housing Finance Companies (HFCs) in Middle Layer and above, only for the issuance of Partial Credit Enhancement. The directions shall not apply to the derivative exposures of a RE. Which NFB facilities are permitted to be issued by RE? RE shall issue a NFB facility only on behalf of a customer having funded credit facility from the RE. However, this shall not be applicable in respect of – Derivative contracts entered int...
Post a Comment
Read more