The Reserve Bank of India (RBI) has issued a press release of the RBI’s Governor’s Statement on the first monetary policy of 2023. This statement was released on 8th February, 2023.
The Governor points out that presently there is the unprecedented events of the last three years have put to test monetary policy frameworks globally. In a very short period, monetary policies across the world have veered from one extreme to the other in response to a series of overlapping shocks. In contrast to the Great Moderation era of the 1990s and the early years of this century, monetary policy was confronted with an unprecedented contraction in economic activity followed by a surge in global inflation.
The statement further elucidates that the Monetary Policy Committee (MPC) met on 6th, 7th and 8th February 2023. Based on an assessment of the macroeconomic situation and its outlook, the MPC decided by a majority to increase the policy repo rate by 25 basis points to 6.50 per cent, with immediate effect. Consequently, the standing deposit facility (SDF) rate will stand revised to 6.25 per cent; and the marginal standing facility (MSF) rate and the Bank Rate to 6.75 per cent.
The MPC also decided by a majority to remain focused on withdrawal of accommodation to ensure that inflation remains within the target going forward, while supporting growth.
Pertinently, the real GDP growth for 2023-24 is projected at 6.4 per cent with Q1 at 7.8 per cent; Q2 at 6.2 per cent; Q3 at 6.0 per cent; and Q4 at 5.8 per cent.
As part of India’s gradual move towards normalising liquidity and market operations, MPC has decided to restore market hours for the Government Securities market to the pre-pandemic timing of 9 am to 5 pm. Moreover, as part of our ongoing endeavour to further develop the government securities market, it also proposes to permit lending and borrowing of G-secs.
The following are Additional Measures that will be implemented in this year:
- Penal Charges on Loans: To further enhance transparency, reasonableness and consumer protection, draft guidelines on levy of penal charges will be issued to obtain comments from stakeholders.
- Climate Risk and Sustainable Finance: it has been decided to issue guidelines 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.
- Expanding the Scope of Trade Receivables Discounting System (TReDS): expand the scope of TReDs 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).
- Extending UPI for Inbound Travellers to India: It is now proposed to permit all inbound travellers to India to use UPI for their merchant payments (P2M) while they are in the country. To begin with, this facility will be extended to travellers from G-20 countries arriving at select international airports
- QR Code based Coin Vending Machine – Pilot project: These vending machines will dispense coins against debit to the customer’s account using UPI instead of physical tendering of banknotes.