The third bi-monthly monetary policy for FY24 was released on Thursday by Reserve Bank of India (RBI) Governor Shaktikanta Das. The six-member Monetary Policy Committee (MPC) of the RBI met for three days from August 8th to August 10th. Today, the RBI maintained the repo rate at 6.5%. The central bank has increased the repo rate by 250 basis points (bps) since May 2022.

RBI has instructed that banks or NBFCs should not increase or decrease EMI without informing the customers of other loans including home or auto at floating rates. It will be necessary to do this in case of an increase or decrease in interest rates. The repo rate has been kept at 6.5% due to the possibility of rising inflation. RBI has raised the inflation forecast for the year 23-24 from 5.2% to 5.4%.

This decision was taken in the meeting of the Monetary Policy Committee. In a meeting chaired by RBI Governor, it was instructed that if the customers taking loans on floating rates do not agree to increase the EMI burden, then they will have the option to shift to a fixed-rate or terminate the loan prematurely.

RBI Policy Meeting Highlights:

• UPI Lite transaction limit from Rs 200 to Rs 500, voice payment option

The central bank also gave the option of making voice payments through Artificial Intelligence (AI). Also, through UPI Lite, customers will now be able to make payments without the Internet. National Payment Corporation of India (NPCI) is making an AI voice bot. It will provide a payment facility through voice.

• This facility will be available in both feature phones and smartphones.
• In the initial phase, this facility will be in Hindi and English only. Later this facility will be available in other Indian languages as well.

2- Interest Rates:

• Repo rate unchanged at 6.5%
• The standing deposit facility (SDF) rate remains at 6.25%
• The marginal standing facility (MSF) rate and Bank Rate maintained at 6.75%
• CRR at 4.5%

3- GDP Projections:

• -Real GDP growth projection for FY224 retained at 6.5%
• GDP forecast for Q1FY24 at 8%
• GDP forecast for Q2FY24 at 6.5%
• GDP forecast for Q3FY24 at 6%
• GDP forecast for Q4FY24 at 5.7%
• GDP growth for Q1FY25 is projected at 6.6%

4- Inflation Forecast

• CPI inflation forecast for FY24 raised to 5.4% from 5.1%
• CPI inflation forecast for Q2FY24 raised to 6.2% from 5.2%
• CPI inflation forecast for Q3FY24 raised to 5.7% from 5.4%
• CPI inflation forecast for Q4FY24 retained at 5.2%
• CPI inflation forecast for April-June 2024 pegged at 5.2%

5- Liquidity Measures

Between May 19, 2023, and July 28, 2023, all scheduled banks must maintain an incremental cash reserve ratio (I-CRR) of 10% on the growth in their net demand and time liabilities (NDTL).

6- Revision in IDF framework

The Infrastructure Debt Funds (IDFs) regulatory framework has been updated. The following are the main revisions to the framework:

• withdrawal of the requirement to have a sponsor for the IDFs,
• allowing IDFs to finance toll-operate-transfer (ToT) projects as direct lenders,
• permitting IDFs to raise funds through ECBs, and (iv) making tri-partite agreements optional for PPP projects.

7- On floating-interest loans

Establishing a clear structure for the reset of interest rates on floating-interest loans is proposed.