Summary: On August 8, 2024, the Reserve Bank of India (RBI) announced its latest monetary policy, keeping the repo rate unchanged at 6.50%, with the standing deposit facility (SDF) at 6.25%, and the marginal standing facility (MSF) and bank rate at 6.75%. The RBI remains focused on withdrawing accommodation to align inflation with its 4% target, while supporting economic growth. The projected real GDP growth for 2024-25 stands at 7.2%, and CPI inflation is projected at 4.5%. Key policy updates include the creation of a public repository for digital lending apps to ensure transparency, increasing the frequency of credit information reporting from monthly to fortnightly, and enhancing the UPI transaction limit for tax payments from ₹1 lakh to ₹5 lakh. Additionally, the RBI plans to introduce “Delegated Payments” through UPI, allowing primary users to set transaction limits for secondary users. The Cheque Truncation System (CTS) will also be upgraded to enable continuous cheque clearing, reducing the clearing cycle to a few hours. Detailed instructions on these measures will be issued in due course.
RBI Monetary Policy – Resolution of Monetary Policy Committee: The various decisions are as follows. (RBI Monetary Policy Resolution Dated 08/08/2024)
- To keep the Repo rate under Liquidity Adjustment Facility (LAF) unchanged at 6.50%. The standing deposit facility (SDF) rate at 6.25% and marginal standing facility (MSF) rate and bank Rate at 6.75%.
- To remain focused on withdrawal of accommodation to ensure that inflation progressively aligns to target while supporting growth. CPI inflation target of 4% with in a band of +/- 2%.
- The real GDP growth projected for 2024-25 at 7.2%.
- The CPI Inflation projected for 2024-25 at 4.5%.
- The updated policy rates are Repo- 6.5%, SDF- 6.25%, MSF and Bank Rate- 6.75%, CRR- 4.5%, SLR- 18.0%, Fixed Reverse Repo- 3.35%.
RBI Monetary Policy – Statement on Development and Regulatory Policies: The various measures set out are as follows. (RBI Monetary Policy- Dvpt. and Regulatory Policies Dated 08/08/2024)
- Public Depository of Digital Lending Apps: The reports have highlighted presence of unscrupulous players in digital lending who falsely claim their association with RBI regulated entities (REs). Accordingly, to aid the customers in verifying the claim of Digital Lending App’s (DLAs) association with REs, Reserve Bank is creating a public repository of DLAs which will be available on RBI’s website. Detailed instructions in this regard shall be issued shortly.
- Frequency of Reporting of Credit Information to Credit Information companies: At present credit institutions (CIs) are required to report the credit information of their borrowers to credit information companies (CICs) at monthly or such shorter intervals as mutually agreed between the CI and CIC. With a view to provide a more up-to-date picture of a borrower’s indebtedness, it has been decided to increase the frequency of reporting from monthly intervals to fortnightly basis or at such shorter intervals as mutually agreed. Lenders will be able to make better risk assessment of borrowers. Necessary instructions will be issued shortly.
- Enhancing Transaction Limits for Tax Payments through UPI: Currently, the transaction limit for UPI is capped at ₹1 lakh. As direct and indirect tax payments are common, regular and high value, it has been decided to enhance the limit for tax payments through UPI from ₹1 lakh to ₹5 lakh per transaction. Necessary instructions will be issued separately.
- Introduction of Delegated Payments through UPI: It is proposed to introduce “Delegated Payments” in UPI. “Delegated Payments” would allow an individual (primary user) to set a UPI transaction limit for another individual (secondary user) on the primary user’s bank account. This product is expected to add to the reach and usage of digital payments across the country. Detailed instructions will be issued shortly.
- Continuous Clearing of Cheques under Cheque Truncation System (CTS): Cheque Truncation System (CTS) currently processes cheques with a clearing cycle of up to two working days. It is proposed to transition CTS from the current approach of batch processing to continuous clearing with ‘on-realisation-settlement’. Cheques will be scanned, presented, and passed in a few hours and on a continuous basis during business hours. The clearing cycle will reduce from the present T+1 days to a few hours. Detailed guidelines in this regard shall be issued shortly.
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