The key benchmark rate has now been hiked for the sixth consecutive time. Wednesday’s MPC meeting is the last one for this fiscal.
The repo rate is the rate at which the RBI lends to the banks. Announcing the hike, RBI Governor Shaktikanta Das said the MPC decided to hike the policy rate by 25 bps to 6.5 per cent.
Since May last year, the RBI has increased the short-term lending rate by 225 basis points to contain inflation, mostly driven by external factors, especially global supply chain disruption following the Russia-Ukraine war outbreak.
Here are the key announcements made today:
- After the repo rate hike, the standing deposit facility (SDF) rate stands adjusted to 6.25 per cent and the marginal standing facility (MSF) rate and the Bank Rate to 6.75 per cent
- As for the stance, the MPC with a 4:2 majority decided to remain focused on the withdrawal of accommodation to ensure that inflation remains within the target going forward while supporting growth
- Gross domestic product (GDP) is expected to grow at 6.4 per cent during 2023-24 with Q1 growth rate at 7.8 per cent, Q2-6.2 per cent, Q3 at 6 per cent and Q4 at 5.8 per cent and the risks are evenly balanced
- Retail inflation for FY23 is forecast at 6.5 per cent and for Q4 at 5.7 per cent. Retail inflation for FY24 has been forecast at 5.3 per cent with Q1 at 5 per cent, Q2 at 5.4 per cent, Q3 at 5.4 per cent and Q4 at 5.6 per cent
- Based on feedback received fon its discussion paper on Climate Risk & Sustainable Finance in July 2022, guidelines will be issued to regulated entities (REs) on a broad framework for acceptance of green deposits, disclosure framework on climate-related financial risks and guidance on Climate Scenario Analysis and Stress Testing
- A slew of measures announced to improve the cashflows of MSMEs, and the scope of the Trade Receivables Discounting System (TReDS) is proposed to be expanded. Some changes include the provision of an insurance facility for invoice financing, and permitting rediscounting of invoices
- The RBI has proposed to permit all inbound travellers to India to use UPI for their merchant payments (P2M) while in India
- A pilot project on QR Code-based Coin Vending Machine will be launched across 12 cities, which will dispense coins against debit to the customer’s account using UPI instead of physical tendering of banknotes
Among all the MPC members, Ashima Goyal and Jayanth Varma voted against the repo rate hike. The two members also voted against the stance opted for by the MPC.
The next meeting of the MPC is scheduled for April 3, 5 and 6, 2023.