Skip to main content

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

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

Rates and reserves

 

ChangeRevised rate
Policy repo rateUnchanged6.50%
Standing deposit facility (SDF) rate6.25%
Marginal standing facility (MSF) rate6.75%
Bank rate6.75%

Monetary policy stance

  • Withdrawal of accommodation to ensure that inflation progressively aligns with the target, while supporting growth.

Economy 

 

GDP growth projectionCPI inflation projection
FY 2023-246.5%5.1%
Q1 of FY 2023-248.0%4.6%
Q2 of FY 2023-246.5%5.2%
Q3 of FY 2023-246.0%5.4%
Q4 of FY 2023-245.7%5.2%
  • Domestic macroeconomic fundamentals are strengthening – economic activity is exhibiting resilience; inflation has moderated; the current account deficit has narrowed; and foreign exchange reserves are comfortable.
  • The Indian banking system remains stable and resilient, credit growth is robust and domestic financial markets have evolved in an orderly manner.
  • India’s real gross domestic product (GDP) recorded a growth of 7.2% in 2022-23, stronger than the earlier estimate of 7% and is holding up well. 
  • Headline Consumer Price Index (CPI) inflation has come down during March-April 2023 to 4.7% in April, the lowest reading since November 2021. The headline inflation, though within the tolerance band, still remains above the target and the goal is to achieve the target of 4% going forward. 
  • The average system liquidity is still in surplus mode and could increase as ₹2,000 banknotes get deposited in the banks.
  • The Indian rupee has remained stable since January 2023. 
  • Foreign exchange reserves stood at a comfortable level of US$ 595.1 billion (as on June 02, 2023). Inclusive of net forward assets, foreign exchange reserves are well above US$ 600 billion.

Other measures

  • The extant regulatory guidelines prescribe prudential limits for outstanding borrowing in Call and Notice Money Markets for Scheduled Commercial Banks (SCBs). With a view to providing greater flexibility for managing their liquidity, SCBs (excluding Small Finance Banks) will be permitted to set their own limits for borrowing in Call and Notice Money Markets within the prescribed prudential limits for inter-bank liabilities.
  • Compromise settlement is recognized as a resolution mechanism in respect of non-performing assets (NPA) under the Prudential Framework, which is currently applicable to SCBs and select NBFCs. Comprehensive guidelines will be issued on compromise settlements and technical write-offs which will now be applicable to all regulated entities including co-operative banks. The extant prudential norms on restructuring of borrower accounts affected by natural calamities will be rationalized.
  • RBI had issued the regulatory framework for Digital Lending in August / September 2022. With a view to further promoting responsible innovation and prudent risk management, the guidelines will be issued on Default Loss Guarantee arrangements in Digital Lending. 
  • While revising the priority sector lending targets for Urban Co-operative Banks (UCBs) in 2020, a glide path up to March 2024 was provided for a non-disruptive transition to achieve the revised targets. While a number of UCBs have met the required milestones as of March 2023, a need has arisen to ease the implementation challenges faced by other UCBs. Therefore, the timelines for achieving the targets has been extended by two more years up to March 2026. Further, UCBs which have met the targets as on March 31, 2023 will be suitably incentivised.
  • The licensing framework for Authorised Persons (APs) will be rationalized and simplified.
  • The e-RUPI, a digital voucher launched in August 2021, rides on the Unified Payments Interface (UPI) system of National Payments Corporation of India (NPCI). At present, purpose-specific vouchers are issued by banks on behalf of Central and State Governments and to a limited extent on behalf of corporates. The scope and reach of e-RUPI vouchers will be expanded by –
    • Permitting non-bank prepaid payment instruments (PPI) issuers to issue e-RUPI vouchers
    • Enabling issuance of e-RUPI vouchers on behalf of individuals
    • Simplifying the process of issuance, redemption, etc. 
  • Bharat Bill Payment System (BBPS) is an ‘anytime anywhere’ bill payments platform which is operational since August 2017. The scope of BBPS was further expanded in December 2022 to include all categories of payments and collections, both recurring and non-recurring in nature, as well as facilitating in-bound cross-border bill payments. To enhance efficiency of the system and to encourage greater participation, the process flow of transactions and membership criteria for onboarding operating units in BBPS will be streamlined.
  • RuPay Debit and Credit cards issued by banks in India are gaining increased acceptance abroad. To expand the payment options for Indians travelling abroad, banks will be permitted to issue RuPay Prepaid Forex cards. Further, RuPay cards will be enabled for issuance in foreign jurisdictions. 


References

Reserve Bank of India. (2023, June 08). 'Governor’s Statement: June 8, 2023'. Retrieved from https://www.rbi.org.in/Scripts/BS_PressReleaseDisplay.aspx?prid=55816

Reserve Bank of India. (2023, June 08). 'Statement on Developmental and Regulatory Policies'. Retrieved from https://www.rbi.org.in/Scripts/BS_PressReleaseDisplay.aspx?prid=55815


Follow at - Telegram   Instagram   LinkedIn   Twitter   Facebook

Labels:

Comments

Post a Comment

Popular Posts

Regulatory Measures for the Foreign Exchange Market

Reserve Bank of India (RBI) has announced regulatory measures for the foreign exchange market. Cancellation and rebooking / rollovers of foreign exchange derivative contracts An Authorised Dealer shall not permit users to rebook any foreign exchange derivative contract involving the INR, whether deliverable or non-deliverable, which has been cancelled with any of the Authorised Dealers. An Authorised Dealer may, however, continue to permit users to rollover foreign exchange derivative contracts on maturity, subject to compliance with the extant directions. Threshold limit for taking positions without requirement to establish the existence of underlying Authorised Dealers were permitted to allow users to take positions upto USD 100 million equivalent of notional value (outstanding at any point of time), across all Authorised Dealers, for hedging contracted exposure without the requirement to establish the existence of underlying exposure.  Further, a user was allowed to take positio...
Post a Comment
Read more

Highlights of RBI Annual Report 2025-26 – Chapter 1 to 3

Reserve Bank of India (RBI) has published its annual report for the financial year 2025-26. In a series of articles, we will go through the highlights of the report. This is the first article in the series.  Legal framework for publication of Annual Report by the RBI Report of the Central Board of Directors on the working of RBI for the year is submitted to the Central Government in terms of Section 53(2) of the RBI Act, 1934. The letter of transmittal is signed by the RBI Governor and addressed to the Finance Secretary, Ministry of Finance, Government of India. Documents submitted by the RBI to the Central Government In pursuance of Section 53(2) of the RBI Act, 1934, the following documents have been submitted to the Central Government – A copy of the Annual Accounts for the year ended March 31, 2026 certified by the RBI’s Auditors and signed by Chief General Manager-in-charge, all the Deputy Governors and Governor. 2 copies of the Annual Report of the Central Board on the workin...
Post a Comment
Read more

Credit Facilities to Scheduled Castes (SCs) & Scheduled Tribes (STs)

Reserve Bank of India (RBI) has issued guidelines on credit facilities to Scheduled Castes (SCs) & Scheduled Tribes (STs). What are the guidelines on credit facilities to SCs & STs? District Level Consultative Committees formed under the Lead Bank Scheme should continue to be the principal mechanism of co-ordination between banks and development agencies.  National Scheduled Tribes Finance & Development Corporation and National Scheduled Castes Finance & Development Corporation have been set up under the administrative control of Ministry of Tribal Affairs and Ministry of Social Justice & Empowerment, respectively. Banks should advise their branches / controlling offices to render all the necessary institutional support to enable these institutions to achieve the desired objectives. Loans sanctioned to State Sponsored Organisations for Scheduled Castes / Scheduled Tribes for the specific purpose of purchase and supply of inputs and / or the marketing of the out...
Post a Comment
Read more

Reserve Bank of India Act, 1934 – Part-IV – Section 42 to 45 (updated as on April 15, 2025)

The Reserve Bank of India Act, 1934 provides the statutory basis of the functioning of the Reserve Bank of India (RBI). In a series of articles, we will briefly go through the provisions of RBI Act, 1934. This is the fourth article in the series.  Section 42 – Cash reserves of scheduled banks to be kept with the Bank (updated as on April 15, 2025) 42(1) – Every bank included in the Second Schedule shall maintain with RBI an average daily balance at a percent (notified by RBI) of its total demand and time liabilities in India. For the purpose, fortnight means the period from the first day to the 15th day of each calendar month or 16th to the last day of each calendar month, both days inclusive. 42(1A) – RBI may direct every scheduled bank to maintain with RBI, in addition to the balance prescribed under Section 42(1), an additional average daily balance at a rate (specified by RBI). 42(1C) – RBI may specify any transaction or class of transactions to be regarded as liability in...
Post a Comment
Read more

Which are the monetary policy instruments used by RBI?

Monetary policy is a policy of central bank of the country (for India, its RBI) whereby it aims to control the money supply in the country to manage inflation and promote growth. RBI uses various instruments to manage liquidity in the system with the objective to achieve the desired level of inflation and growth. Which are the monetary policy instruments used by RBI? Repo Rate – Repo rate or policy repo rate is a rate at which banks borrow funds from RBI against a collateral of approved government and other securities. Reverse Repo Rate – Reserve repo rate is the rate at which banks can park their surplus liquidity with RBI against a collateral of approved government securities.  Standing Deposit Facility (SDF) – SDF rate is the rate at which banks can park their surplus liquidity with RBI without the collateral of government securities. Marginal Standing Facility (MSF) – MSF rate is the rate at which banks can borrow funds from RBI by dipping up to 2% into their Statutory Liqu...
Post a Comment
Read more