RBI Monetary Policy: The Reserve Bank of India has today announced the results of the first Monetary Policy Committee meeting for the financial year 2024-25. This MPC meeting started from April 3 and its results were released today. RBI Governor Shaktikanta Das said in the bi-monthly monetary policy review that the Reserve Bank is not making any changes in the repo rate and thus the repo rate has been maintained at 6.50 percent. The reverse repo rate is at 3.35 percent and the bank rate has been kept constant at 6.75 percent. The Monetary Policy Committee of RBI took the decision on the policy rate with a 5:1 majority.

Highlights of RBI Governor’s address

1. India’s foreign exchange reserves have reached a record high of $645.6 billion and this figure has been touched on March 29, 2024. Some time ago there were concerns regarding foreign exchange reserves but RBI handled this issue firmly and maintained confidence.

2. There has been a decline in the core inflation rate but it is above the RBI target of 4 percent. Bringing it to a controlled target remains one of the priorities.

3. In the interest of the economy, it is necessary that CPI i.e. Core Price Inflation be brought within the prescribed range.

4. RBI is in a better position to deal with important economic issues and take necessary steps. The MPC will remain steadfast in its commitment to bring inflation in line with the RBI’s target of four percent.

5. There is concern at the global level due to political tension and obstacles on trade routes.

6. The MPC stands firm on its decision to withdraw the liberal stance and the stance of withdrawal of accommodation has been kept unchanged.

7. A target of 7 percent or more has been set for GDP in all four quarters of financial year 2025. A target of 6.9 percent has been set for the second quarter only.

8. The stability of the Indian Rupee is in line with the strength of the Indian economy and is seen to be on a solid base.

9. Investment in government securities and government bonds is increasing rapidly in the country.

10. There is continuous fluctuation in food inflation rate, but in the second quarter of the financial year 2025, it is expected to come within the target of 4 percent set by RBI and remain at 3.8 percent.

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The Reserve Bank of India (RBI) has made it mandatory for banks to provide ‘key fact statement’ (KFS-key fact statement) including interest and other terms to borrowers for all retail and MSME (Micro, Small and Medium Enterprises) loans. It was decided to do so on Thursday. At present, KFS is mandatory in respect of loans given by commercial banks to personal loan borrowers, digital loans by RBI regulated entities (RE) and micro finance loans.

What did Governor Shaktikanta Das say?

Announcing the bi-monthly monetary policy, RBI Governor Shaktikanta Das said the central bank has recently announced a number of measures to promote greater transparency and disclosure by REs in pricing of loans and other charges levied on customers. One such measure is to require lenders to provide their borrowers with a KFS containing key information regarding the loan agreement in a simple and easy to understand format. “It has been decided to make it mandatory for all REs to provide KFS to borrowers for all retail and MSME loans,” the governor said. Das said important information about the terms of the loan agreement including all-inclusive interest cost. Providing this will greatly help the borrowers in making an informed decision.

RBI also announced an important step regarding hedging of gold price risk in the over-the-counter (OTC) market at the International Financial Services Center (IFSC), GIFT City, Gandhinagar. To protect resident institutions from gold price risk, they were allowed access to IFSC recognized exchanges in December 2022. Das said that this decision has been taken to avoid fluctuations in the price of gold in the OTC segment in IFSC. The Central Bank will issue related instructions separately.

Announcement on regulation of electronic trading platform also

Meanwhile, RBI also announced a review of the regulatory framework for electronic trading platforms (ETPs). Governor Das said that over the last few years, there has been increased integration of the ‘onshore forex’ market with the ‘offshore’ market, significant evolution in the technology landscape and increased product diversity.

Market makers have also requested access to offshore ETPs offering permitted Indian Rupee (INR) products. Das also announced RBI’s intention to enhance the security features of the Aadhaar Enabled Payment System (AEPS), which was used by 37 crore people in 2023.

“To enhance the security of AEPS transactions, it is proposed to streamline the ‘onboarding’ process including mandatory due diligence for the ‘AEPS Touch Point Operator’ to be followed by banks,” Das said. Instructions will be issued soon. Currently, Das said, lenders are using the SMS method to comply with additional factor authentication requirements, but advances in technology have opened up new means.

“To facilitate the use of such mechanisms for digital security, it is proposed to adopt a framework for principle-based authentication of digital payment transactions,” he said.

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