Summary: The Reserve Bank of India (RBI) announced its monetary policy on 9th October 2024, maintaining the repo rate at 6.5%, along with the standing deposit facility (SDF) at 6.25% and the marginal standing facility (MSF) at 6.75%. The central bank revised its policy stance to “neutral,” emphasizing inflation alignment with a 4% target while supporting growth. The projected real GDP growth for 2024-25 is 7.2%, with inflation estimated at 4.5%. Regulatory updates include extending the ban on foreclosure charges and pre-payment penalties to loans for Micro and Small Enterprises (MSEs). RBI will issue a discussion paper on capital-raising avenues for Urban Co-operative Banks (UCBs) and create a climate risk information system (RB-CRIS) to support financial stability. Additionally, UPI limits for UPI123Pay and UPI Lite have been enhanced to ₹10,000 and ₹5,000, respectively. Lastly, a beneficiary account name look-up facility will be introduced for RTGS and NEFT to improve transaction verification.
Reserve Bank of India (RBI) announced its latest monetary policy on 9th October 2024:
RBI Monetary Policy – Resolution of Monetary Policy Committee: The various decisions are as follows. (RBI Monetary Policy Resolution Dated 09/10/2024)
– 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 change the stance to ‘neutral’ and to remain focused on a durable alignment of inflation with the target, while supporting growth. (Earlier stance was 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 09/10/2024)
– Responsible Lending Conduct – Levy of Foreclosure Charges/ Pre-payment Penalties on Loans: As per present guidelines, banks and NBFCs are not permitted to levy foreclosure charges/ pre-payment penalties on any floating rate term loan sanctioned to individual borrowers with or without co-obligant(s), for purposes other than business. It has been decided to broaden the scope of such regulations to cover loans to Micro and Small Enterprises (MSEs) extended by the Regulated Entities.
– Discussion Paper on Capital Raising Avenues for Primary (Urban) Co- operative Banks: The initial set of guidelines on issue and regulation of share capital and securities for Primary (Urban) Co-operative Banks (UCBs) to ensure alignment with the Banking Regulation Act, were issued in 2022. However, these guidelines did not cover provisions such as issuance of special shares, issuance of shares at a premium, etc., which are new to co-operative banking sector. A discussion paper on capital raising avenues for UCBs will be issued for eliciting feedback and suggestions from stakeholders.
– Creation of Reserve Bank Climate Risk Information System (RB-CRIS): Climate change is emerging as one of the significant risks to the financial system. It is crucial for regulated entities to undertake climate risk assessments for ensuring stability of their balance sheets and that of the financial system. Such an assessment requires, among other things, high quality data relating to local climate scenarios, climate forecasts, and emissions. To bridge the gaps, it is proposed to create a data repository namely, the Reserve Bank – Climate Risk Information System (RB-CRIS) comprising of two parts. The first part will be a web-based directory, listing various data sources, (meteorological, geospatial, etc.) which will be publicly accessible. The second part will be a data portal comprising of datasets (processed data in standardised formats) and the same will be made available only to the regulated entities in a phased manner.
– UPI – Enhancement of limits: it has been decided to enhance the limits for the following products of UPI:
i) UPI123Pay: UPI123 was launched in March 2022, with a view to enable feature-phone users to use UPI. This facility is now available in 12 languages. Currently, the per-transaction limit in UPI123Pay is capped at ₹5000. It has been decided to enhance the per-transaction limit to ₹10,000.
ii) UPI Lite: A limit of ₹500 per transaction and an overall limit of ₹2000 per UPI Lite wallet, is presently applicable, with the facility of auto-replenishment. It has now been decided to increase the UPI Lite wallet limit to ₹5,000 and per-transaction limit to ₹1,000.
– Introduction of beneficiary account name look-up facility: Payment Systems like UPI and IMPS provide a facility to the remitter to verify the name of the receiver (beneficiary) before initiating a payment transaction. To enable remitters to verify the name of the beneficiary account holder before initiating funds transfer, it is decided to introduce a ‘beneficiary account name look-up facility’ for Real Time Gross Settlement System (RTGS) and National Electronic Funds Transfer (NEFT) systems.
Author Bio
