RBI Hikes Repo Rate By 50 bps

New Delhi: In order to bring rising inflation back to normal, the Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) announced a 50 basis point (bps) increase in the repo rate to 5.90% on Friday.

“Consequently, the standing deposit facility (SDF) rate stands adjusted to 5.65% and the marginal standing facility (MSF) rate and the Bank Rate to 6.15%. The Monetary Policy Committee has decided to remain focused on withdrawal of accommodation to ensure that inflation remains within the target going forward, while supporting growth”, RBI Governor Shaktikanta Das remarked.

The governor further announced a series of four additional measures. First one is in connection to the expected loss-based approach to be released for loan-loss provisioning banks. Second one is on securitization of Stressed Assests Framework (SSAF) to be released. Third measure being Internet banking facility for customers of Regional Rural Banks. Fourth being Regulation of offline payment aggregators.

The RBI governor also informed that the central bank’s growth projection for the Indian economy for 2022-23 is projected at 7.0 percent with Q2 at 6.3 per cent; Q3 at 4.6 per cent; and Q4:2022-23 at 4.6 per cent, with risks broadly balanced.

The growth for Q1 of 2023-24 is projected at 7.2 per cent.

Against the current challenging global environment, economic activity in India remains stable, stated the RBI Governor. “While real GDP in first quarter of this year turned out to be lower than expectations, it is perhaps the highest among major global economies”, he added.

Inflation inched up to 7.0 per cent in August from 6.7 per cent in July, stated the RBI Governor. Global geopolitical developments are weighing heavily on the domestic inflation trajectory, he said.

The RBI Governor stated that monetary policy has to carry forward its calibrated action on policy rates and liquidity conditions consistent with the evolving inflation growth dynamics. It must remain alert and nimble, he stated.

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