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RBI’s Monetary Policy (February 08, 2023): In A Nutshell

The bi-monthly monetary policy of Reserve Bank of India (RBI) was announced on February 08, 2023. Here are some of the highlights of the monetary policy announcement.

Rates and reserves

 

 Change Revised rate
Policy repo rate Increase by 25 basis points 6.50%
Standing deposit facility (SDF) rate 6.25%
Marginal standing facility (MSF) rate 6.75%
Bank rate 6.75%

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 2023-24 6.4% 5.3%
Q1 of FY 2023-24 7.8% 5.0%
Q2 of FY 2023-24 6.2% 5.4%
Q3 of FY 2023-24 6.0% 5.4%
Q4 of FY 2023-24 5.8% 5.6%

Other measures

  • Lending and borrowing of Government Securities (G-secs) will be permitted.
  • Regulated Entities (REs) follow divergent practices for levying of penal interest on advances, which are at times found to be excessive. To enhance transparency, draft guidelines on levy of penal charges will be issued to obtain comments from stakeholders.
  • Recognising the importance of climate related financial risks which may have financial stability implications, RBI had issued a Discussion Paper on Climate Risk and Sustainable Finance in July 2022. Based on the feedback received, guidelines will be issued for REs on (i) a broad framework for acceptance of Green Deposits; (ii) disclosure framework on Climate-related Financial Risks; and (iii) guidance on Climate Scenario Analysis and Stress Testing.
  • Trade Receivables Discounting System (TReDS) facilitates financing of trade receivables of MSMEs. The scope of TReDs will be expanded by (i) providing insurance facility for invoice financing; (ii) permitting all entities / institutions undertaking factoring business to participate as financiers in TReDS; and (iii) permitting re-discounting of invoices (that is, developing a secondary market in TReDS).
  • All foreign nationals and NRIs visiting India will be permitted to use UPI for their merchant payments (P2M) while they are in India. To begin with, this facility will be extended to travellers from G-20 countries arriving at select international airports.
  • A pilot project will be launched on QR Code based Coin Vending Machine (QCVM) in 12 cities. These vending machines will dispense coins against debit to the customer’s account using UPI instead of physical tendering of banknotes. Based on the learnings from the pilot, guidelines will be issued to banks to promote distribution of coins using these machines.


References

Reserve Bank of India. (2023, Februaty 08). 'Governor’s Statement'. Retrieved from https://rbi.org.in/Scripts/BS_PressReleaseDisplay.aspx?prid=55177


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