RBI MPC Meeting 2023: Repo Rate Status Quo, Rising Food Prices, UPI Lite, Key Highlights

The unanimous decision by the 6-membered monetary policy committee decided to retain the key interest rate unchanged at 6.50 per cent for the third consecutive time. Here are the key MPC decisions

The Reserve Bank of India's (RBI's) monetary policy committee (MPC) on Thursday decided to retain the key interest rate unchanged at 6.50 per cent for the third consecutive time. Reserve Bank Governor Shaktikanta Das in his statement said that MPC decided to keep the policy repo rate unchanged with preparedness to act, should the situation so warrant.

The unanimous decision by the six-membered monetary policy committee comes even as the central bank expects retail inflation "to surge during July-August led by vegetable prices."

Since May 2022, the central bank had raised the repo rate six consecutive times by 250 basis points to 6.5 per cent. However, the Reserve Bank maintained a status quo during the last two MPC meetings in April and June. 

Here Are The Key Highlights Of the August Monetary Policy Committee Meeting

• The Monetary Policy Committee (MPC) decided unanimously to keep the policy repo rate unchanged at 6.50 per cent. Consequently, the standing deposit facility (SDF) rate remains at 6.25 per cent, and the marginal standing facility (MSF) rate and the Bank Rate at 6.75 per cent.


• The MPC also decided by a majority of 5 out of 6 members to remain focused on withdrawal of accommodation to ensure that inflation progressively aligns with the target, while supporting growth.


• Shaktikanta Das said that the RBI MPC remains resolute in its commitment to aligning inflation to the 4 per cent target and anchoring inflation expectations. 


• Das said even as the global economy continues to face daunting challenges of elevated inflation, high levels of debt, tight and volatile financial conditions, continuing geopolitical tensions, fragmentation, and extreme weather conditions, India is expected to "withstand these external headwinds far better than many other countries."


• The RBI said that India's real GDP growth for 2023-24 is projected at 6.5 per cent with Q1 at 8.0 per cent, Q2 at 6.5 per cent, Q3 at 6.0 per cent, and Q4 at 5.7 per cent.


• For the next financial year 2024-25, the central bank projected real GDP growth at 6.6 per cent with risks evenly balanced.


• RBI Governor said that the momentum of overall economic activity in India is positive and industrial activity is holding ground, as industrial production growth (IIP), core data, and PMI shows. 


• Investment activity gained further steam on the back of government capital expenditure, rising business optimism and revival in private capex in certain key sectors, he said. 


• On inflation, Governor Shaktikanta Das said the spike in vegetable prices, led by tomatoes, would exert sizeable upside pressures on the near-term headline inflation trajectory.


• However, he added that this jump is likely to correct with fresh market arrivals with significant improvement in the progress of the monsoon and kharif sowing in July. Das added the impact of the uneven rainfall distribution warrants careful monitoring.


• According to RBI, Consumer Price Index (CPI) based retail inflation is projected at 5.4 per cent for FY24


• The CPI for Q2 has been estimated at 6.2 per cent, Q3 at 5.7 per cent, and Q4 at 5.2 per cent, with risks evenly balanced. The retail inflation for Q1 of FY25 is projected at 5.2 per cent.


• RBI Governor Shaktikanta Das said that India’s current account deficit (CAD) was contained at 2.0 per cent of GDP in 2022-23 as compared with 1.2 per cent in 2021-22. 


• On the financing side, foreign portfolio investment (FPI) flows have remained buoyant in 2023-24 with net FPI inflows at $20.1 billion till August 8, 2023, which is the highest since 2014-15, he noted. 


• India’s external debt to GDP ratio improved to 18.9 per cent at end-March 2023 from 20.0 per cent at end-March 2022, Das said. 


• The Rupee has remained stable since January 2023 as foreign exchange reserves (forex) crossed the $600 billion mark, he further noted. 


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  The RBI also proposed to increase the UPI-Lite limit to Rs 500 from Rs 200 earlier. It further said the overall limit is, however, retained at Rs 2,000 to contain the risks associated with the relaxation of the two-factor authentication.

  
  


• "Conversational Payments" mode is proposed for UPI, enabling users to conduct transactions through AI-powered conversations, available in multiple Indian languages.


• The RBI said offline payments in UPI will be facilitated using Near Field Communication (NFC) technology to enhance retail digital payments even in areas with weak internet connectivity.


• The central bank also said that a public tech platform is being developed to provide frictionless credit delivery by facilitating a seamless flow of required digital information to lenders. Pilot projects for digitalising lending processes (like Kisan Credit Card loans and dairy loans) have yielded positive results and are expanding, it said. The platform will have an open architecture and APIs to connect various financial sector players, reducing costs, enabling quicker disbursements, and improving scalability.