Skip to main content

RBI’s Monetary Policy (October 06, 2023): In A Nutshell

The bi-monthly monetary policy of Reserve Bank of India (RBI) was announced on October 06, 2023. Here are some of the highlights of the monetary policy announcement.

Rates

 

ChangeRate
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.

Global economy

  • The global economy is slowing under the impact of tight financial conditions, protracted geopolitical tensions and increasing geoeconomic fragmentation. 
  • Global trade is contracting. 
  • Headline inflation is easing but rules above the target in major economies. 
  • While major central banks are signalling a peaking of their rate hike cycle, there are indications that the tight monetary policy stance could persist for longer than anticipated earlier. 
  • Sovereign bond yields have firmed up, the US dollar has appreciated, and global equity markets have corrected.

Domestic Economy 

 

GDP growth projectionCPI inflation projection
FY 2023-246.5%5.4%
Q2 of FY 2023-246.5%6.4%
Q3 of FY 2023-246.0%5.6%
Q4 of FY 2023-245.7%5.2%
Q1 of FY 2024-256.6%5.2%
  • Growth –
    • Domestic economic activity exhibits resilience on the back of strong domestic demand.
    • Domestic demand conditions are likely to benefit from sustained buoyancy in services, consumer and business optimism, government’s continued thrust on capex, healthy balance sheets of banks and corporates, and supply chain normalisation. 
    • Real gross domestic product (GDP) posted a growth of 7.8% year-on-year (y-o-y) in Q1:2023-24.
  • Inflation –
    • The heightened inflation levels in July and August at 7.4% and 6.8% respectively, were largely driven by food price pressures.
    • Core inflation softened to 4.9% during July-August 2023.
    • Near-term inflation is expected to soften on the back of vegetable price correction, especially in tomatoes, and the reduction in LPG prices.
    • Inflation target is 4% and not 2-6%. Aim is to align inflation to the target on a durable basis, while supporting growth.
  • Headwinds from geopolitical tensions and geoeconomic fragmentation, volatility in global financial markets, global economic slowdown, uneven monsoon, global food and energy prices, pose risks to the outlook.
  • Financial market –
    • The transmission of the 250 basis points (bps) increase in the policy repo rate to bank lending and deposit rates is still incomplete.
    • Excessive liquidity can pose risks to both price and financial stability. To ensure that liquidity conditions evolve in sync with the monetary policy stance, as a temporary measure, an incremental cash reserve ratio (I-CRR) of 10% was imposed, which impounded about ₹1.1 lakh crore from the banking system. The I-CRR was reviewed on September 08, 2023 and is being discontinued in a phased manner, ending October 07, 2023.
    • The Indian banking system continues to be resilient, backed by improved asset quality, stable credit growth and robust earnings growth.
  • External Sector –
    • The current account deficit (CAD) for Q1:2023-24 declined to 1.1% of GDP.
    • India’s foreign exchange reserves stood at US$ 586.9 billion as on September 29, 2023.
    • External debt to GDP ratio was placed at 18.6% at end-June 2023 and reserves to external debt ratio was 94.6%. 
    • The reserve cover of imports is over 10 months.

Other measures

  • The extant prudential norms for projects under implementation have been reviewed and a comprehensive regulatory framework applicable for all regulated entities will be released for public comments. 
  • Under the Large Exposures Framework, Non-Banking Financial Companies (NBFCs) in the Upper Layer are permitted to use Credit Risk Mitigation (CRM) instruments for reducing their exposures to a counterparty. NBFCs in the Middle and Base Layers will also be permitted to use CRM instruments for reducing their counterparty exposure under the credit concentration norms.
  • To incentivize the Urban Co-operative Banks (UCBs) that have met the prescribed Priority Sector Lending (PSL) targets as on March 31, 2023, the existing limit for Gold Loans under the Bullet Repayment scheme has been increased from ₹2 lakh to ₹4 lakh. 
  • A draft omnibus framework for recognising Self-Regulatory Organisations (SROs) for various categories of Regulated Entities (REs) of RBI will be issued for stakeholder comments.
  • Payments Infrastructure Development Fund (PIDF) Scheme was operationalised RBI in January 2021 for a period of 3 years to incentivise the deployment of payment acceptance infrastructure such as physical Point of Sale (PoS), Quick Response (QR) codes in tier-3 to tier-6 centres, north eastern states and Union Territories of Jammu & Kashmir and Ladakh. Beneficiaries of PM SVANidhi Scheme in Tier-1 and 2 centres were later included in August 2021. 
    • As at end-August 2023, over 2.66 crore new touch points have been deployed under the Scheme. 
    • The scheme has been extended by 2 years, i.e., up to December 31, 2025. 
    • The coverage of PIDF scheme is also being expanded (i) to include the beneficiaries of PM Vishwakarma Scheme and (ii) to deploy emerging modes of payment acceptance, such as soundbox and Aadhaar-enabled biometric payment acceptance devices. 
  • At present, Card-on-File (CoF) token can only be created through merchant’s application or webpage. CoF token creation facilities will now be introduced directly at the issuer bank level. 
  • At present, the Internal Ombudsman (IO) framework in regulated entities comprises of separate guidelines for select Scheduled Commercial Banks (SCBs), Non-Bank issuers of Prepaid Payment Instruments (PPIs), NBFCs; and all Credit Information Companies (CICs). These guidelines have similar design features but vary in certain operational aspects. The IO guidelines will be consolidated and harmonised into a single master direction. 


References

Reserve Bank of India. (2023, October 06). 'Governor’s Statement: October 6, 2023'. Retrieved from https://www.rbi.org.in/Scripts/BS_PressReleaseDisplay.aspx?prid=56501

Reserve Bank of India. (2023, October 06). 'Statement on Developmental and Regulatory Policies'. Retrieved from https://www.rbi.org.in/Scripts/BS_PressReleaseDisplay.aspx?prid=56503


Follow at - Telegram   Instagram   LinkedIn   Twitter   Facebook

Labels:

Comments

Post a Comment

Popular Posts

Modified Interest Subvention Scheme for Agricultural Loans

Reserve Bank of India (RBI) has published the modified interest subvention scheme (MISS) for short term loans for agriculture and allied activities availed through Kisan Credit Card (KCC) during the financial year 2025-26. Which loans are covered under modified interest subvention scheme (MISS)? The short-term crop loans and short-term loans for allied activities including animal husbandry, dairy, fisheries, bee keeping etc. up to an overall limit of ₹3 lakh to farmers through KCC during the year 2025-26 will be covered for interest subvention. Which lending institutions are covered under MISS? The MISS is applicable to the lending institutions viz. Public Sector Banks (PSBs) and Private Sector Banks (in respect of loans given by their rural and semi-urban branches only), Small Finance Banks (SFBs) and computerized Primary Agriculture Cooperative Societies (PACS) ceded with Scheduled Commercial Banks (SCBs), on use of their own resources.  How much is the interest subvention? The a...
Post a Comment
Read more

Digital Payments Awareness Week 2026

Reserve Bank of India (RBI) is observing digital payments awareness week from March 09 to 15, 2026. Digital Payments Awareness Week (DPAW) Digital Payments Awareness Week (DPAW) is an initiative to highlight the impact and importance of digital payments and to create awareness about safe usage of digital payment products.  Digital Payments Awareness Week (DPAW) 2026 Reserve Bank of India (RBI) is observing DPAW 2026 from March 09 to 15, 2026.  Under the mission ‘Har Payment Digital’, the theme for the current year is ‘Thoda Dhyan Se’ (be alert/ be careful). The theme emphasises the safe use of digital payments. ‘Har Payment Digital’ mission RBI had launched the mission ‘Har Payment Digital’ on the occasion of the DPAW 2023. This is part of RBI’s endeavour to make every person in India a user of digital payments. Previous Digital Payments Awareness Weeks (DPAWs) Year Theme 2025 ‘India Pays Digitally’ under the mission ‘Har Payment Digital’ ...
Post a Comment
Read more

Export and Import of Goods and Services

Reserve Bank of India (RBI) has issued regulations on export and import of goods and services. What are the regulations for declaration of exports? An exporter of goods shall furnish to the specified authority, a declaration in the Export Declaration Form (EDF) specifying the amount representing the full export value of goods, at the time of export. EDF will be deemed to be submitted as part of shipping bill for goods exported through Electronic Data Interchange (EDI) port. An exporter of services shall furnish to the specified authority, a declaration in EDF specifying the amount representing the full export value of services, within 30 days from the end of month in which invoice for services has been raised. The exporter of services who has exported services to one or more recipients in a month, may submit a single EDF for all such exports. The exporter of services other than software, may submit an EDF on or before the date of receipt of payment. In the case of a non-EDI port for ex...
Post a Comment
Read more

FEMA - Regulations on Guarantees

Reserve Bank of India (RBI) had issued regulations governing guarantees under the Foreign Exchange Management Act, 1999 (FEMA). What is a guarantee? A guarantee, including a counter-guarantee, means a contract, by whatever name called, to perform the promise, or discharge a debt, obligation or other liability (including a portfolio of debts, obligations or other liabilities), in the event of default by the principal debtor. Who are the participants in a guarantee transaction? Principal debtor – a person in respect of whose default the guarantee is given. Surety – a person who gives a guarantee. Creditor – a person to whom the guarantee is given. When can a person resident in India act as surety / principal debtor? A person resident in India may act as a surety / principal debtor for a guarantee, subject to conditions that – The underlying transaction for which the guarantee is being given or arranged is not prohibited under FEMA guidelines. The surety and the principal debtor are eligi...
Post a Comment
Read more

Priority Sector Lending (PSL) guidelines (updated as on January 19, 2026)

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 (CEOBSE) as applicable as on the corresponding date of the preceding year are as below – Categories Total Priority Sector ...
Post a Comment
Read more