RBI Governor Shakti kanta das keeps repo rate unchanged for 11th time, retain neutral stance.
SDF (Standard Deposit Facility) remains at 6.25%: This is the interest rate at which banks can park their excess funds with the central bank. No change suggests a steady approach to controlling inflation while maintaining liquidity in the economy.
MSF (Marginal Standing Facility) and Bank Rate at 6.75%: This is the rate at which banks can borrow from the central bank overnight. The unchanged rate signals the continuation of the current policy stance, with the central bank ensuring adequate liquidity without excessive borrowing from banks.
The Reserve Bank of India’s (RBI) announcement of a 50 basis point reduction in the Cash Reserve Ratio (CRR) signals a proactive move to enhance liquidity in the banking system.
50 Basis Point Reduction: A 50 basis point (0.50%) reduction in the CRR means that banks will now be required to hold a smaller portion of their deposits in reserve. This frees up more funds for banks to lend to businesses and individuals, thereby boosting liquidity in the economy.
The RBI’s expansion of the UPI-linked credit facility to include small finance banks marks a significant development in the digital financial ecosystem. Here’s an overview of the announcement:
1. What is UPI-linked Credit Facility?
Launched in September 2023, the UPI-linked credit facility allows users to access instant credit through UPI-enabled applications like BHIM, PayZapp, Paytm, and Google Pay (GPay).
The facility provides users with a pre-sanctioned credit limit that can be utilized directly during UPI transactions, facilitating quick and seamless credit access for users during payments.
2. Inclusion of Small Finance Banks:
Small finance banks, which were previously excluded, can now participate in the UPI-linked credit scheme. This broadens the scope of the service and allows more people to access credit through a wider array of banking institutions, particularly in underserved or rural areas.
The Reserve Bank of India (RBI) Monetary Policy Committee (MPC) has revised its inflation forecast for FY25, increasing the Consumer Price Index (CPI) inflation projection to 4.8 percent, up from the earlier estimate of 4.5 percent. The RBI also revised its CPI inflation forecast for Q3FY25 to 5.7 percent, compared to the previous forecast of 4.8 percent. For Q4FY25, the CPI inflation forecast was updated to 4.5 percent, higher than the earlier estimate of 4.2 percent. Q1FY26 CPI inflation projection revised higher to 4.6% Vs 4.3% earlier.