scorecardresearchRBI Monetary Policy: 6 key highlights from the central bank's MPC meet

RBI Monetary Policy: 6 key highlights from the central bank's MPC meet

Updated: 06 Apr 2023, 01:21 PM IST

  • RBI Governor Shaktikanta Das did emphasise that the MPC's choice to hold the repo rate steady is only valid for this meeting.

The RBI has slightly raised its real GDP prediction for FY24 from 6.4 percent to 6.5 percent.

The RBI has slightly raised its real GDP prediction for FY24 from 6.4 percent to 6.5 percent.

At its most recent bi-monthly meeting, the Reserve Bank of India's (RBI) Monetary Policy Committee (MPC) decided to keep the repo rate at 6.5%. The central bank's goal is to strike a balance between inflation and growth concerns.

RBI Governor Shaktikanta Das did emphasize that the MPC's choice to hold the repo rate steady is only valid for this meeting. In an effort to control inflation, the central bank has already raised the repo rate by a total of 250 basis points since May, but the inflation rate has largely remained above the RBI's comfort zone of 2–6 percent.

Let's take a look at six key highlights from the April 2023 monetary policy.

RBI On Inflation

Shaktikanta Das stated that 5.2% inflation is expected in FY 2023–2024. Das claimed that although overall inflation is higher than intended, the present policy rate is still accommodative.

Cost conditions have eased a little bit, and household inflation forecasts too. Undoubtedly, adverse climatic circumstances pose a threat to the trajectory of future inflation. When introducing the policy changes, the RBI Governor said that the increasing uncertainty in the global financial markets and the pressures on inflation were needed to be watched closely.

"Looking ahead, the inflation outlook will be conditioned by several factors, both global and domestic. While crude oil and commodity prices have corrected in recent months, their future trajectories remain uncertain, given the lingering geopolitical hostilities and likely demand rebound from countries reopening from pandemic-related lockdowns. Global financial markets are exhibiting volatility. Domestically, the expectations of a bumper rabi harvest augur well for the future trajectory of food inflation," said the monetary policy report.

The central bank currently expects inflation to be 5.1%, 5.4%, 5.4%, and 5.2% in Q1, Q2, Q3, and Q4, respectively, with risks being equally divided. The central bank had predicted Q1 inflation at 5%, Q2 at 5.4%, Q3 at 5.4%, and Q4 at 5.6% in its February policy announcement.


The RBI has slightly raised its real GDP prediction for FY24 from 6.4 percent to 6.5 percent.

Das stated in the MPC briefing that while the risks to GDP are balanced, the long-lasting geopolitical tensions have a downside risk to development. According to estimates, the GDP will be 7.8 percent in Q1FY24, 6.2 percent in Q2FY24, 6.1 percent in Q3FY24, and 5.9 percent in Q4FY24.

"Taking into account the baseline assumptions, survey indicators and model forecasts, real GDP growth is expected at 6.5% in 2023-24 – 7.8% in Q1; 6.2% in Q2; 6.1% in Q3; and 5.9% in Q4 – with risks evenly balanced around this baseline path. For 2024-25, assuming a normal monsoon and no major exogenous or policy shocks, the structural model estimates indicate real GDP growth at 6.5%, with quarterly growth rates in the range of 5.5-7.0%," said the monetary policy report.

RBI on Rupee

The nominal exchange rate of the Indian rupee, or INR, fluctuated in a range of INR 81–83 per US dollar (USD) in H2, according to the monetary policy report. While risk-off sentiments towards assets in emerging market economies and a growing current account imbalance put downward pressure on the currency, the INR was supported by a correction in the US dollar. In light of these events, the baseline assumes an exchange rate of INR 82 for every US dollar as opposed to INR 80 in the September 2022 MPR.

RBI on Banking Sector

Das in his speech stated that with the fight against inflation far from over, the global economy is confronted with serious financial stability challenges from the recent banking sector development in certain advanced economies.

According to the governor, this calls for a reappraisal of the responsibilities of the regulators and the regulated entities worldwide and their collective role on safeguarding the stability of the financial system. While regulators need to identify potential vulnerabilities and take proactive regulatory and supervisory measures, it is important for the regulatory institutions to exercise due diligence risk management and corporate governance practices. They need to pay close attention to asset liability mismatch and profile of their deposit base while building adequate capital buffers and conducting period stress test. It is in this context that the central bank has focused on micro and macro prudential measures in the recent years to prevent build up of financial vulnerability. The central bank has adopted prudent approach towards regulation and supervisition and has taken several steps in these areas in the recent years.

"Our supervisory system has also being strengthened significantly in recent years we have adopted unified and harmonised approach for commercial banks, NBFCs, and urban co-operative banks. The focus is now more in identifying the root cause of vulnerability rather than dealing with the symptoms alone. As a result the Indian banking system remains sound and healthy with strong capital and liquidity buffers improving asset quality, better provisioning coverage and along with improved profitability," said Das.

RBI on United Payments Interface (UPI)

Das announced on Thursday that the regulator will allow banks to use United Payments Interface (UPI) to operate pre-approved credit accounts, thereby broadening the service's use. He claimed that the RBI's action would promote innovation.

RBI on New Web Portal

A new centralised web portal to look for unclaimed deposits older than 10 years has been developed, according to the RBI. Bank customers currently have to access multiple banks' websites to collect these deposits. Customers of banks will benefit from having access to their unclaimed deposits through this new online portal.

According to Das, at the moment, depositors or beneficiaries of unclaimed bank accounts that have been lying dormant for ten years or longer must search through the websites of numerous institutions to find such deposits.

Now, it has been agreed to create a web portal to allow searches across multiple banks for potential unclaimed deposits in order to improve and broaden the access of depositors and beneficiaries to information on such unclaimed deposits. The RBI governor claims that this will aid depositors and recipients in recovering unclaimed funds.


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First Published: 06 Apr 2023, 01:21 PM IST