The Reserve Bank of India (RBI) on Wednesday raised the key policy interest rate by 50 basis points owing to intensifying inflationary pressures, slowing growth, persisting geopolitical tensions and sanctions, and lingering COVID-19 related supply chain bottlenecks.
An ET poll suggested the policy repo rate could be increased by 25-50 basis points with nearly half the 23 market participants forecasting a 50-basis-point, or half-a-percentage point, increase. The others said the policy rate could increase between 25 and 40 basis points.
Here are the top takeaways from today’s meet:
- The policy repo rate has been hiked by 50 basis points to 4.90%
- The standing deposit facility (SDF) rate stands adjusted to 4.65% and the marginal standing facility (MSF) rate and the Bank Rate to 5.15%.
- The monetary policy committee (MPC) will remain focused on the withdrawal of pandemic-era measures to ensure that inflation remains within the target going forward while supporting growth.
- Inflation projections have been revised to 6.7% in FY23, 7.5% in Q1, 7.4% in Q2, 6.2% in Q3 and 5.8% in Q4.
- MPC’s projections indicate that inflation is likely to remain above the upper tolerance level of 6% through the first three quarters of the ongoing fiscal. Persisting inflationary pressures could set in motion second-round effects on headline CPI, it said.
- The RBI has opted to leave its growth projections unchanged. The real GDP growth projection for FY23 has been retained at 7.2%, Q1 at 16.2%, Q2 at 6.%, Q3 at 4.1% and Q4 at 4.0%.
- The existing limits on individual housing loans by cooperative banks will be increased. The limits for Tier I /Tier II Urban Cooperative Banks (UCBs) will be revised from ₹30 lakh/ ₹70 lakh to ₹60 lakh/ ₹140 lakh, respectively. For Rural Cooperative Banks, the limits will be increased from ₹20 lakh to ₹50 lakh for RCBs with assessed net worth less than ₹100 crore and from ₹30 lakh to ₹75 lakh for other RCBs.
- State Cooperative Banks and District Central Co-operative Banks (DCCBs) will now be allowed to extend finance to commercial real estate- residential Housing, considering the growing need for affordable housing.
- The RBI has announced an increase in the limit for e-mandates/ standing instructions on credit/debit cards and prepaid payment instruments (PPIs) for recurring transactions from ₹5,000 at present to ₹15,000. Auto-transactions up to ₹15,000 no longer require customers to authenticate such payments manually with a One Time Password (OTP),
- To deepen the reach and usage of UPI, the RBI has proposed to allow the linking of credit cards to UPI. Rupay credit cards will be enabled with this facility to start with.
