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

Highlights of RBI Annual Report 2023-24 – Chapter 7 to 12

Reserve Bank of India (RBI) has published its annual report for the financial year 2023-24. In a series of articles, we will go through the highlights of the report. This is the fifth and last article in the series.  Chapter 7 – Public Debt Management Ways And Means Advances (WMA) limit for the Government of India (GoI) for H1:2023-24 (April to September 2023) was fixed at ₹1,50,000 crore and for H2:2023-24 (October 2023 to March 2024) was fixed at ₹50,000 crore. RBI issued an ultra-long security of 50-year tenor aggregating ₹30,000 crore to cater to the growing needs of long-term institutional players. Issuance of Sovereign Green Bonds (SGrBs) for an aggregate amount of ₹20,000 crore included maiden issuance of 30-year (₹10,000 crore) SGrB in addition to 5-year (₹5,000 crore) and 10-year (₹5,000 crore) SGrBs. A new 3-year benchmark security was introduced as part of government market borrowing programme during H1:2023-24.  The basket of products offered through the ‘Retail ...
Post a Comment
Read more

Lending against Gold and Silver collateral

Reserve Bank of India (RBI) has issued directions on lending against the collateral of gold and silver. To whom are the directions applicable? The directions are applicable to the following regulated entities (REs) – Commercial Banks (including Small Finance Banks, Local Area Banks and Regional Rural Banks, but excluding Payments Banks). Primary (Urban) Co-operative Banks (UCBs) & Rural Co-operative Banks (RCBs), i.e., State Co-operative Banks (StCBs) and Central Co-operative Banks (CCBs). Non-Banking Financial Companies (NBFCs), including Housing Finance Companies (HFCs). Which loans are covered under the directions? The directions shall apply to all loans offered by an RE for the purpose of consumption or income generation (including farm credit) where eligible gold or silver collateral is accepted as a collateral security. What is eligible collateral? Eligible collateral means the collateral of jewellery, ornaments or coins made of gold or silver. A lender shall not grant any ad...
Post a Comment
Read more

Pre-payment Charges on Loans

Reserve Bank of India (RBI) has issued directions on pre-payment charges on loans. What issues were observed by RBI during supervisory reviews? Divergent practices were observed amongst Regulated Entities (REs) with regard to levy of pre-payment charges in case of loans sanctioned to Micro and Small Enterprises (MSEs) which lead to customer grievances and disputes.  Certain REs were found to include restrictive clauses in loan contracts / agreements to deter borrowers from switching over to another lender, either for availing lower rates of interest or better terms of service. To whom shall the directions be applicable? The directions shall apply to all commercial banks (excluding payments banks), co-operative banks, Non-Banking Financial Companies (NBFCs) and All India Financial Institutions (AIFIs). To which loans shall the direction be applicable? The directions shall be applicable to all floating rate loans and advances sanctioned or renewed on or after January 01, 2026. Which ...
Post a Comment
Read more

Due Diligence of AePS Touchpoint Operators

Reserve Bank of India (RBI) has issued directions on due diligence of Aadhaar Enabled Payment System (AePS) touchpoint operators. What is Aadhaar Enabled Payment System (AePS)? Aadhaar Enabled Payment System (AePS) is a payment system in which transactions are enabled through Aadhaar number and biometrics / OTP authentication providing financial services such as cash withdrawal, cash deposit, fund transfer, and non-financial services such as mini statement and balance enquiry, etc. AePS is a payment system operated by National Payment Corporation of India (NPCI) that facilitates interoperable transactions using Aadhaar enabled authentication.  What is AePS touchpoint? AePS touchpoint is the terminal deployed by acquirer banks to facilitate AePS transactions, which shall include both mobile and fixed points. Who is AePS Touchpoint Operator (ATO)? AePS Touchpoint Operator (ATO) is the individual onboarded by the acquiring bank who operates the AePS touchpoint. What is the rationale b...
Post a Comment
Read more

Priority Sector Lending (PSL) guidelines

Reserve Bank of India (RBI) has issued the revised guidelines on Priority Sector Lending (PSL) which has come into effect from April 01, 2025.  To whom does Priority Sector Lending (PSL) guidelines apply? Priority Sector Lending (PSL) guidelines apply to – Commercial Bank [including Regional Rural Bank (RRB), Small Finance Bank (SFB), Local Area Bank (LAB)] Primary (Urban) Co-operative Bank (UCB) other than Salary Earners’ Bank  What are the categories under PSL? The categories under priority sector are as follows – Agriculture Micro, Small and Medium Enterprises Export Credit Education Housing Social Infrastructure Renewable Energy Others What are the PSL targets for banks? The targets and sub-targets set under PSL, to be computed on the basis of the Adjusted Net Bank Credit (ANBC) / Credit Equivalent of Off-Balance Sheet Exposures (CEOBE) as applicable as on the corresponding date of the preceding year are as below – Categories Total Priority Sector A...
Post a Comment
Read more