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Informist, Friday, Dec. 6, 2024

MUMBAI - Following is a compilation of stories on the Reserve Bank of India's monetary policy that was detailed on Friday:

SPECIAL STORIES

WRAP: RBI CUTS CRR BUT SEEKS MORE TIME, EVIDENCE TO LOWER REPO RATE

Heading into the December meeting, the Reserve Bank of India's Monetary Policy Committee was faced with one of worst growth-inflation dynamics in recent times. With GDP growth tanking in Jul-Sept and inflation above 6%, the committee was under pressure to lower the repo rate for the first time in four-and-a-half years. What markets got instead was a cut in the Cash Reserve Ratio, with the policy repo rate left unchanged at 6.50% for the 11th consecutive meeting.

To be sure, two of the committee members--Nagesh Kumar and Ram Singh--voted in favour of a 25-basis-point repo rate cut. But the majority, which includes three representatives from the RBI, seem to want more credible evidence for a 'well-timed' rate action.

The CRR cut comes two months after the MPC loosened its policy stance to neutral and will release about INR 1.16 trillion into a banking system that has seen conditions tighten in recent weeks. The RBI, clearly, does not want to lower the repo rate when liquidity conditions are not conducive for quick transmission by banks.

"Supporting liquidity ahead of any repo rate cut is the right sequencing of the policy measures for effective transmission," said Anubhuti Sahay, head of India Economic Research at Standard Chartered. According to Madhavi Arora, chief economist at Emkay Global Financial Services, the policy trade-off facing the RBI is such that the CRR cut was the "least-costly" action the central bank could take.

GETTING PROJECTIONS WRONG

Forecasts within and out of the RBI have found it difficult to predict growth and inflation numbers in recent months, with most of them missing the Jul-Sept GDP number and the September and October CPI inflation prints by wide margins. On Friday, the RBI took cognisance of its errors, lowering its 2024-25 (Apr-Mar) growth view sharply by 60 basis points to 6.6% and raising the inflation forecast by 30 bps to 4.8%.

For the RBI, growth and inflation are closely linked. While Governor Shaktikanta Das said in his address Friday that "price stability is essential for sustained growth", Deputy Governor Michael Patra blamed the slowdown on inflation. Both also remain fairly positive about the future, refusing to judge trend growth on the basis of just one GDP number and pointing to an expected revival in economic activity in the second half of FY25.

Economists, however, are not convinced.

"Our view remains that the growth glass is half empty, not half full and the recent sharp slump in GDP growth should have highlighted the higher growth sacrifice involved in keeping policy rates elevated. Meanwhile, the inflation increase is concentrated primarily in a few food items and underlying inflation continues to remain subdued," said Aurodeep Nandi, India economist at Nomura.

ROAD AHEAD

Das repeatedly said on Friday that rate actions have to be appropriately timed and the RBI requires better visibility on the growth and inflation outlook. He also said if the growth slowdown lingers beyond a point, "policy support" might be needed.

"It is a question of timing," Das told reporters at the post-policy press conference. "They (actions) have to be timed in a manner keeping the outlook in mind and also action has to be taken when it is really going to be most effective and impactful."

Economists have interpreted the RBI and MPC's actions Friday to mean the repo rate may finally be reduced in February. "Going forward, as the worst of quarterly growth reading and peak inflation seem to be behind us, we expect the MPC to derive comfort from the same and commence rate easing from February, cutting the policy repo rate by 25 bps, as inflation moderates closer to target and growth may still fall short of the MPC's forecast," Barclays' economists said in a report.

At its next meeting, the MPC will have plenty of new numbers to weigh up: CPI data for November and December, the first advance estimate of GDP for FY25, and the government's Budget estimates for FY26. What it will not have is the GDP growth number for Oct-Dec, which will be released at the end of February. 

Reported by Shubham Rana

Edited by Akul Nishant Akhoury

RBI WATCH: HAS RBI'S GROWTH OPTIMISM LED TO A POLICY ERROR?

It has taken just two months for India's growth-inflation balance to go from "well-poised" to "unsettled".

After weakness in several high-frequency numbers was batted away by the Reserve Bank of India in October as a reflection of a "mixed" picture of the economy where the positives outweighed the negative, GDP growth sliding to a seven-quarter low of 5.4% in Jul-Sept was a more difficult bouncer to duck. This has led to the full-year growth forecast of the central bank being cut by 60 basis points to 6.6%, close to the lower end of the finance ministry's own projection of 6.5-7.0%.

The RBI's bullishness about India's growth trajectory over the last couple of years has been noteworthy. In December 2023, it had predicted that GDP growth in 2023-24 (Apr-Mar) would be 7.0%, which economists thought was perhaps a tad optimistic. As it turned out, RBI was being conservative, with growth for the full year a scarcely believable 8.2%. The situation could not be more different now: after raising its forecast by 20 bps to 7.2% in June, the central bank has now had to make a sharp downward revision.

Economic forecasting, for sure, is fraught with risks and is difficult at the best of times. The post-pandemic period has seen unusual patterns in data, making the job of forecasters even more challenging. The problem, however, is that the RBI's optimism on growth has stood out very sharply even as economists from outside the central bank--who don't have to err on the side of caution as they don't bear the burden of policymaking--have warned a slowdown is upon us.

The RBI's rosy growth outlook allowed the Monetary Policy Committee to retain the repo rate at 6.50% for the better part of two years and afforded it the room to bring down inflation to its target. Had the central bank's growth forecasts not been what they were, pressure to lower interest rates would have started to pile up much earlier than October.

Even now, the RBI's commentary on growth is a bit unsettling. For one, Governor Shaktikanta Das in his address Friday termed the latest growth print as an "aberration". Second, the MPC thinks the growth outlook is "resilient", Das further said, although the committee's resolution itself does not say so. Finally, the revised forecast for FY25 is still well above what several non-RBI economists expect: Nomura and Emkay Global Financial Services are at 6.0%, Kotak Mahindra Bank at 6.1%, and State Bank of India at 6.3%, to name a few.

Interestingly, it is the RBI representatives on the MPC that seem to be behind the curve, with two external members voting for a 25 bps reduction in the repo rate on Friday--the same as in August and up from just Nagesh Kumar in October.

Monetary policy must be forward-looking. But by visibly reacting to the Jul-Sept growth number--which is old data--the RBI has admitted it was wrong on growth to some extent. The issue is that the central bank's forward-looking numbers do not inspire confidence either. And if the MPC continues to make its interest rate decisions on the basis of these forecasts, which seem to be presenting a glass-half-full picture rather than a glass-half-empty one, it may have to amplify the size of its actions so that it catches up to the curve. 

Reported by Siddharth Upasani

Edited by Ashish Shirke

FOCUS: RBI'S FCNR(B) HIKE MAY NOT BE A PANACEA FOR RUPEE'S TROUBLES

Ahead of the December monetary policy outcome, the currency market was rife with speculation about what the Reserve Bank of India will do to address the recent depreciation in the rupee. The RBI did not entirely pour cold water on those expectations, yet in some ways it did.

The central bank's tool to support the rupee came in the form of a 150-basis-point hike in interest rate ceilings on Foreign Currency Non-Resident Accounts (Banks) or FCNR (B) deposits from one year to five years. RBI Governor Shaktikanta Das, while announcing the December Monetary Policy Committee outcome Friday, said the interest rate ceilings have been increased to attract more capital inflows.

The Indian currency has been under pressure recently and has been hitting successive record lows. The pressure on the rupee has been such that the RBI had to deploy multiple measures, including verbal intervention, in various segments of the foreign exchange market to curb the currency volatility and depreciation in the rupee. 

But market participants are not hopeful of any relief for the rupee from Friday's measure, as was reflected in the day's rupee movement. After touching a high of 84.5700 a dollar during the day, the rupee went on to settle at 84.6875 a dollar on Friday, only 5 paise higher from the previous close. 

"Our initial assessment is that the incremental capital inflows into India from these FCNR measures may help INR (Indian Rupee) at the margin temporarily, but should not be substantial enough to change the overall trajectory for USD/INR (dollar/rupee) to head higher," MUFG Bank said in a report, adding that the RBI coming up with the measure indicates the central bank's concern on the recent weakness in the rupee. 

Market participants said that the FCNR measure will attract only tepid foreign inflows, with banks unlikely to raise rates as these are already high. Banks are now allowed to raise fresh FCNR (B) deposits between one year and less than three years at rates not exceeding the overnight alternative reference rate plus 400 bps compared with 250 bps earlier. For deposits of three to five years, the ceiling has been increased to the overnight alternative reference rate plus 500 bps against 350 bps earlier.  

"The aim is to attract capital amid pressures on the rupee. However, we don't expect that banks will increase the rates, as the rates are already quite high. With SOFR (secured overnight financing rate) at 4.59%, FCNR (B) deposits in US dollar could be 7.09% for 1-3 year tenors and 8.09% for 3-5 year tenors," State Bank of India said in a report.

In 2023-24 (Apr-Mar), India received total inflows of $6.4 billion into FCNR (B) deposits. So far in the current financial year, FCNR (B) deposits have got inflows of $5.3 billion.

Some dealers said that had the RBI made the fresh FCNR (B) deposits mobilised by banks eligible to be swapped with RBI under its swap window to hedge foreign exchange risks, as it did in 2013, the inflows would have been material in nature. MUFG Bank forecasts the rupee to fall to 85.20 by Jan-Mar and 86.00 by Oct-Dec of FY26.

Most market players said that the RBI opting for a hike in interest rate ceilings on FCNR (B) deposits indicates that the central bank does not expect steady foreign portfolio inflows going ahead, and is also rethinking its capacity to intervene through dollar sales to support the rupee. India's foreign exchange reserves had declined by over $46 billion from the record high of $704.89 billion late in September. Reserves are at $658.09 billion for the week ended Nov. 29.

"This is a tacit attempt to tap other sources of foreign capital flows, which could give RBI some breathing room and lower its need for FX intervention," Madhavi Arora, chief economist at Emkay Global Financial Services, said in a note.

Apart from taking actions, Das also went out of his way to signal that all was good in the hood through his words. He spoke at length about the RBI's intervention strategy in the foreign exchange market, but failed to calm currency traders' nerves. "He (RBI) sounded too defensive (of RBI's actions in the FX market). It sounded like overcompensation and gave mixed signals," said a senior treasury official at a state-owned bank.

Das said the RBI has combined market discipline with prudent intervention in the foreign exchange market, which has created a system that supports stability, resilience and growth.

Apart from the increase in interest rate ceiling on FCNR (B) accounts, the RBI also cut the cash reserve ratio of banks by 50 bps, which gives the central bank space to intervene through dollar sales in the foreign exchange market to support the rupee. Barring these two measures, market participants did not find anything in Friday's policy outcome that has the potential to materially change the weak outlook for the Indian currency. And with the Donald Trump presidential regime in the US on its way, it is almost certain that the rupee's bad days are staring the market in the face.   

Reported by Pratiksha

Edited by Tanima Banerjee

FOCUS: MPC'S CHRISTMAS CAKE FOR BOND MARKET LACKS BOTH ICING AND CHERRY

If the Reserve Bank of India's interest rate decision Friday initially suggested to the bond market that the Monetary Policy Committee was close to delivering a rate cut in the near future, some traders were caught on the wrong foot with Governor Shaktikanta Das' comments, which suggested that lower interest rates remained some time away.

After the shocking GDP print of 5.4% for Jul-Sept, traders had expected the RBI to soften its tone considerably, with inflation warnings set aside and the MPC moving to support economic activity. While this did not mean a repo rate cut was on the cards, a reduction in the cash reserve ratio on Friday was considered a slam dunk, setting the stage for lower interest rates in February.

While the market did get its CRR cut and Ram Singh joined fellow external member Nagesh Kumar in the rate cut corner to signal an incremental, albeit unsuccessful, shift in policy, RBI Governor Das had other plans. In what may or may not be his last MPC meeting as governor of the RBI, Das branded the recent awkward CPI and GDP prints as an "aberration", saying that durable price stability is essential for high growth, and that the committee assessed the growth outlook to be resilient.

"The RBI has erred on caution," said Sandeep Yadav, head – fixed income at DSP Mutual Fund.

DAS OUT, PARTY IN?

With such limited softening in the tone of the MPC from its primary mouthpiece, traders were left with a bitter taste in their mouths, some of whom hit stop-losses despite not being positioned for a rate cut at all. To be sure, several traders had overplayed their hand after the latest GDP data and furiously back-pedalled. The froth in the market dissipated in a hurry as the 10-year benchmark bond yield on Friday surged from a low of 6.65% to a high of 6.75%, and is now seen in the range of 6.65-6.86% in the near term, with global developments to provide any additional cues.

"Going ahead, we believe markets will be range bound to approximately 10-15 basis points from current levels," said Prashant Pimple, chief investment officer – fixed income, at Baroda BNP Paribas Mutual Fund. "Despite the CRR cut, liquidity will remain at neutral levels going ahead," he added.

According to dealers, three factors led to the sharp sell-off which may have actually overstated the bad news from the policy. One, the weekly gilt auction, held just after the post-policy press conference, transmitted the negative market sentiment immediately to prices. Two, investors immediately trained their eyes on the upcoming US non-farm payrolls data for November due after market hours Friday. Third, the uncertainty around the RBI governor's tenure has clouded the market's outlook on monetary policy and caused traders to trim their investments in India's government bonds. Das' term as governor is scheduled to end Tuesday. Some traders had hoped for clarity this week on whether he would continue as governor--either from Das himself or the government--but the seasoned bureaucrat and central banker sidestepped questions and refused to give "any headline".

If Das does continue as governor in the same vein, traders see chances of a rate cut even in February dwindling.

"Honestly, after this policy you can't even be sure of a February rate cut, as long as inflation is even moderately high," a treasury executive at a private bank said. "If Das stays as governor, the possibility of that rate cut comes down to 60% – I wouldn't risk more than that."

MARKET WANTS MORE

The market is left with two sources of optimism. One, Das' term ends on Tuesday, and along with him, his steadfast tone on holding rates steady in the face of flagging growth exits the RBI. Two, the central bank recognises that a 50-basis-point cut in the cash reserve ratio is not enough to ensure adequate liquidity.

"The RBI can take its time over its future liquidity actions after today's (Friday's) CRR cut," said A. Prasanna, head of research at ICICI Securities Primary Dealership. "Over the next quarter or the subsequent quarter, the RBI can look at open market operation purchases as the next stage, but the central bank can take its time."

The market's favoured route for further liquidity infusion would be the RBI announcing an OMO (open market operation) purchase calendar. With the central bank directly buying bonds, prices are expected to shoot up, particularly in tenures the RBI chooses to purchase. This spells great news for the bond market given that the government's fiscal consolidation and bond buybacks in 2024-25 (Apr-Mar) have led to the effective net supply of bonds being lower than in FY24. At the same time, banks' balance sheets and insurers' appetites have only grown.

Bond traders must now wait for the MPC--and most importantly, the RBI's representatives on it--to have an epiphany. A rate cut in February is still priced in, and the bond market does not want to be left with no party to attend.  End

Reported by Aaryan Khanna

Edited by Tanima Banerjee

RBI POLICY STORIES

LEAVES REPO RATE UNCHANGED, CUTS CRR BY 50 BPS IN TWO TRANCHES

The Reserve Bank of India's Monetary Policy Committee Friday voted by four votes to two to leave the policy repo rate unchanged at 6.50%. The committee also retained the 'neutral' policy stance, having adopted it in October from 'withdrawal of accommodation'.

The RBI lowered the cash reserve ratio by 50 bps to 4.00% of net, demand and time liabilities in two equal tranches. The cash reserve ratio has been cut by 25 bps effective from the fortnight starting Dec. 14, and by another 25 bps from the fortnight starting Dec. 28.

The central bank lowered its GDP growth forecast for 2024-25 (Apr-Mar) by 60 basis points to 6.6%. The RBI raised its CPI inflation projection for FY25 to 4.8% from its earlier forecast of 4.5%.

The rate-setting panel's decision on the repo rate was in line with expectations. In an Informist poll, 20 of the 25 respondents expected the committee to leave the repo rate unchanged for the 11th meeting in a row. The committee had last changed the repo rate in February 2023.

External members Nagesh Kumar and Ram Singh dissented against the majority interest rate decision and voted for a 25 bps repo rate cut.

"The MPC believes that only with durable price stability can strong foundations be secured for high growth. The MPC remains committed to restoring the inflation growth balance in the overall interest of the economy," RBI Governor Shaktikanta Das said in his statement. "Accordingly, the MPC decided to keep the policy repo rate unchanged at 6.50 per cent in this meeting and continue with the neutral stance of monetary policy as it provides flexibility to monitor and assess the outlook on inflation and growth, and act appropriately."

Das said that the MPC adopted a prudent and cautious approach in this meeting to wait for "better visibility on the growth and inflation outlook". Since the October MPC meeting, inflation has risen sharply, while growth has moderated. 

On the RBI's decision to cut CRR, Das said that systemic liquidity may tighten in the coming months even as it remains adequate right now. "This reduction in the CRR is consistent with the neutral policy stance," Das said, adding that it would release primary liquidity of about INR 1.16 trillion to the banking system.

With the repo rate untouched, the Standing Deposit Facility rate stays at 6.25%, while the Marginal Standing Facility and Bank rates also remain unchanged at 6.75%.

The minutes of the MPC meeting will be published on Dec. 20. The next meeting of the MPC is scheduled for Feb 5-7, which would be the last one for FY25. 

This was the last scheduled MPC meeting for Das and RBI Deputy Governor Michael Patra. Das' term is scheduled to end on Dec. 10 with no communication from the government regarding an extension or a replacement. Patra's tenure ends in January. 

Reported by Shubham Rana

Edited by Vandana Hingorani

FY25 GDP GROWTH PROJECTION LOWERED TO 6.6%, OCT-DEC CUT TO 6.8%

The Reserve Bank of India Friday lowered its GDP growth forecast for 2024-25 (Apr-Mar) by 60 basis points to 6.6%. The central bank was widely expected to lower its full year growth projection after Jul-Sept GDP growth fell to a seven-quarter low of 5.4%, which was 160 basis points lower than the RBI's projection of 7.0%.

"The MPC noted that the near-term inflation and growth outcomes in India have turned somewhat adverse since the October policy," the Monetary Policy Statement said. "Going forward, however, economic activity is set to improve along with rising business and consumer sentiment, as reflected in the Reserve Bank's surveys," the statement said. The MPC Friday left the repo rate unchanged at 6.50%, and retained its "neutral" policy stance.

The RBI also lowered its growth forecasts for Oct-Dec, Jan-Mar, and Apr-Jun. The GDP is now seen expanding 6.8% in Oct-Dec as compared to the previous estimate of 7.4%, and 7.2% in Jan-Mar as against the earlier view of 7.4%. The central bank lowered the Apr-Jun GDP growth forecast by 40 bps to 6.9%. The RBI pegged GDP growth for Jul-Sept FY26 at 7.3%.

In his statement, RBI Governor Shaktikanta Das termed the recent growth print as an aberration, saying that the Indian economy "continues its journey on a sustained and balanced path towards progress". The MPC took note of the recent slowdown in growth, and accordingly lowered the FY25 growth forecast, Das said. 

The Indian economy expanded much lower than anticipated in Jul-Sept because of substantial deceleration in industrial growth. Industrial growth fell in Jul-Sept because of subdued performance of manufacturing companies, contraction in mining activity, and lower electricity demand, Das said. However, the weakness in the manufacturing sector was not broad based and limited to sectors such as petroleum products, iron and steel, and cement, the governor said, adding that the monsoon affected mining and electricity demand in Jul-Sept. 

"Going forward, high frequency indicators available so far suggest that the slowdown in domestic economic activity bottomed out in Q2:2024-25 (Jul-Sept), and has since recovered, aided by strong festive demand and pick up in rural activities," Das said. The MPC termed the growth outlook for Oct-Mar and FY26 as resilient even as it warrants close monitoring. 

Agricultural growth remains supported by healthy kharif production, high reservoir levels, and better rabi sowing, Das said. Industrial activity is also expected to normalise and recover from the lows of Jul-Sept, he added.

After the end of the monsoon season, mining and electricity are expected to normalise, while a pickup in government capital expenditure may provide some impetus to the cement and iron and steel sectors, Das said. The governor termed the November manufacturing purchasing managers’ index print of 56.5 as "elevated". Supply chain pressures have also eased in October and November, while the services sector grows at a strong pace, Das said. 

On the demand side, rural demand is trending upwards, urban demand is showing some moderation, Das said. Government consumption is improving and investment activity is also expected to improve, he added. Considering all these factors, the RBI lowered its FY25 growth forecast to 6.6% from 7.2% earlier.

At a press conference after the announcement of the MPC meeting outcome, RBI Deputy Governor Michael Patra said that the underlying slowdown in growth is because of inflation. "In manufacturing, the biggest issue is the slump in sales growth, that is reflecting inflation hitting urban consumer," Patra said.

"So when sales growth is down, companies do not want to invest in new assets because they see demand as moderate, and it can be met from existing capacity. Since they don't want to engage in new capacity creation, investment is down," the deputy governor said. Patra also said that it would not be appropriate to judge the trend growth on the basis of just one data point, referring to the Jul-Sept growth print.

Das said that the MPC remains committed to restore inflation-growth balance, and only durable price stability can give strong foundation to high growth. "At present, it is necessary to draw on the flexibility provided by the neutral stance to wait for and monitor the incoming data for confirmation of the decline in inflation," the governor said in his statement. The gains on disinflation achieved so far, notwithstanding the recent upticks, need to be preserved, he added.

When asked why the MPC left the repo rate unchanged when the cut in growth projection is sharper than the increase in inflation projection for FY25, Das said the committee's effort is to always follow the legal mandate on growth and inflation in "letter and spirit". "In the life of central bank, there is no room for knee-jerk reaction, we need more credible evidence," Das said.

"We need more evidence with regard to how the outlook is likely to be. And based on that assessment, the effort is always to take action in time. Whatever action we take, it has to be well-timed," the governor said. "Our effort has always been to remain in line with the curve, never fall behind the curve and I think we are maintaining that trend," Das added.

In the last few years, the Indian economy has traversed one of its most difficult periods ever. Indian economy has not just navigated this period of trials successfully but also emerged stronger, Das said. 

On the global economy, the governor said that it has showed unusual resilience in 2024. However, the outlook for global growth is clouded by protectionist tendencies, Das said. Rising protectionist tendencies may undermine global growth and push inflation higher, Das said. 

Reported by Shubham Rana

Edited by Vandana Hingorani

UPS OCT-DEC CPI VIEW BY 90 BPS TO 5.7%, FY25 BY 30 BPS TO 4.8%

The Reserve Bank of India on Friday sharply raised its headline inflation forecast for the current quarter ending December by 90 basis points to 5.7%, while it hiked the projection for the current financial year by 30 bps to 4.8%. The recent spike in inflation highlights the continuing risks of multiple and overlapping shocks to the inflation outlook and expectations, it stated.

"The increasing incidence of adverse weather events, heightened geopolitical uncertainties and financial market volatility pose upside risks to inflation," Governor Shaktikanta Das said while presenting the fifth bi-monthly monetary policy for FY25. At the meeting, the RBI's Monetary Policy Committee kept the policy repo rate unchanged at 6.50% and stuck to neutral policy stance in order "to remain unambiguously focused on a durable alignment of inflation with the target, while supporting growth." "The MPC remains committed to restoring the inflation growth balance in the overall interest of the economy," Das said.

India's CPI inflation rose to a 14-month high of 6.21% in October from 5.49% in September, both of which Das described as "little more than what we expected". The rise in headline inflation was mainly because of a sequential, "unanticipated" rise in food prices. This was the first month since August 2023 that headline inflation was above the upper bound of the Reserve Bank of India's medium-term target range of 2-6%. This was also the second month in a row when CPI inflation was above the central bank's 4% target after having come in below it in July and August.

Food prices have been at the heart of the central bank's inflation management issues, and it is here to stay, even though the Governor listed reasons which may help reign it in. "Food inflation pressures are likely to linger in Oct-Dec of this financial year and start easing only from Jan-Mar, backed by seasonal correction in vegetable prices, kharif harvest arrivals, likely good rabi output and adequate cereal buffer stocks," the governor said.

Food inflation rose to a 15-month high of 10.87% in October from 9.24% in September. Sequentially, the food price index rose 2.6% in October, which pushed the general index of the CPI 1.3% higher from September. Within food, the biggest month-on-month increase in prices was seen in vegetables, which rose 8.2% in October from the previous month. Edible oil prices also rose sharply in October, rising 6.0% on month from September. Prices of cereals and pulses also continued to rise in October.

The quarterly break-up of the central bank's latest inflation forecasts is as follows: 5.7% for Oct-Dec, and 4.5% for Jan-Mar, 4.6% for Apr-Jun and 4% for Jul-Sept. It had previously forecast that inflation in the final two quarters of FY25 to average 4.8% and 4.2%, respectively. On the other hand, it was projected at 4.3% in Apr-Jun. 

Das had, in an earlier policy meeting, used "horse" as a metaphor for inflation. At the post-policy press conference Friday, he said that the horse has made valiant efforts to reign in, and now the task of the central bank is to keep it on a tight lease. 

Going ahead, a good rabi season would be critical to the softening of the food inflation pressures. Early indications point to adequate soil moisture content and reservoir levels, conducive for rabi sowing, Das said. The estimates of a record kharif production should also bring relief to the elevated prices of rice and tur dal while vegetable prices are also expected to see a seasonal winter correction, he said. 

According to data from the Department of Agriculture and Farmers Welfare, as of Monday, rabi sowing across India this year stands at 42.88 million hectares, up 4.1% on year. Kharif production, on the other hand, is expected to be 8 million tonnes in 2024-25 (Jul-Jun), exceeding initial government estimates by at least 1 million tonnes. 

The seasonal winter correction in vegetable prices was also particularly explained by the RBI staff in a paper as part of its Monthly Bulletin for October. "Prices of potatoes and onions increase in November and the seasonal pressures ease in February and May, respectively. Tomato prices increase during July and moderate by March," the paper had said. The other components of CPI show lower seasonal variations. 

"High inflation reduces the disposable income in the hands of consumers and dents private consumption, which negatively impacts the real Gross Domestic Product growth," the governor said. Consumption demand, which has been tepid, has given the government pain in achieving stronger growth in FY24. This year, there has been an improvement, data shows. Private consumption grew 6.0% in Jul-Sept, higher than 2.6% a year ago, but lower than the 7.4% a quarter ago. Even though consumption demand is better on year, urban demand is under scanner as there are signs of a slowdown. 

"The MPC believes that only with durable price stability can strong foundations be secured for high growth," Das said. As widely expected, the RBI Friday lowered its GDP growth forecast for FY25 by 60 basis points to 6.6% after Jul-Sept GDP growth fell to a seven-quarter low of 5.4%, which was 160 basis points lower than the RBI's projection of 7.0%. "Price stability is essential for sustained growth." At the post-policy press conference, Deputy Governor Michael Patra said that underlying slowdown in growth was due to inflation. 

Manufacturing and services firms surveyed by the central point to the firming up of input costs and selling prices in Jan-Mar, the governor added. 

On the upside, Das said that the evolving trajectory of domestic edible oil prices, following the hike in import duties and rise in their global prices, needs to be closely monitored. All said, risks to inflation forecasts are evenly balanced, the MPC statement said. "Going forward, as food price shocks wane, headline inflation is likely to ease and realign with the target as per our projections," the governor said. He reiterated that the last mile of disinflation is turning out to be arduous globally.

On a question regarding targetting core inflation, which strips out food and fuel items, as part of the policy framework, Das said that the legal mandate of the MPC is to look at headline inflation and so the central bank does not have the discretion to choose otherwise. 

This debate on a rethink on what component of inflation to target came after the Economic Survey for FY24 compiled by Chief Economic Adviser to the government V. Anantha Nageswaran, had said India's inflation targeting framework should consider excluding food inflation as higher food prices are, more often, not demand-induced but supply-induced. Short-run monetary policy tools are meant to counteract price pressures arising out of excess aggregate demand growth, it said, adding that it is "worth exploring whether India's inflation targeting framework should target the inflation rate excluding food".

In this endeavour, Das said that the central bank's effort is to follow the flexible inflation targeting framework, and that the RBI's "anti-inflationary monetary policy stance has been a crucial factor in bringing about a significant disinflation". The RBI's medium target for CPI inflation is 4%, with the lower and upper end of the target being 2% and 6%, respectively. Last time CPI inflation was at the central bank's target was four years ago, in Jul-Sept of 2019-20. 

Das said that the gains achieved so far in the broad direction of disinflation, notwithstanding the recent upticks, need to be preserved. "At the same time, the growth trajectory and the evolving outlook also need to be monitored closely.  A status quo in monetary policy in this meeting of the MPC has thus become appropriate and essential," the governor said.   

Reported by Priyasmita Dutta

Edited by Deepshikha Bhardwaj and Akul Nishant Akhoury

LIQUIDITY TO REMAIN TIGHT IN NEXT FEW MONTHS, PROMPTING CRR CUT

The Reserve Bank of India projects liquidity to remain tight in the next few months, Governor Shaktikanta Das said Friday. He cited seasonal factors such as tax outflows and increased currency in circulation to cut the cash reserve ratio by 50 basis points to 4.00% of banks' net demand and time liabilities.

"Even as liquidity in the banking system remains adequate, systemic liquidity may tighten in the coming months due to tax outflows, increase in currency in circulation and volatility in capital flows," Das said in his statement outlining the Monetary Policy Committee's decision.

The cut will be in equal tranches, with the first from the fortnight of Dec. 14 and the second from Dec. 28. In his statement, the governor said normalising the CRR was in line with the "neutral" policy stance adopted in the October policy meeting from the earlier stance of "withdrawal of accomodation". Earlier Friday, the RBI's rate-setting panel maintained status quo on the policy stance, and left the repo rate unchanged at 6.50%.

The move is estimated to increase primary liquidity of the banking system by INR 1.16 trillion, Das said. When asked about open market operations, he said he could not answer the options that the RBI was considering. The central bank would base its decision on how the liquidity conditions evolve, the governor said.

"There is surplus today, and perhaps there will be surplus on Monday as well. But we clearly see that we are going into a phase where liquidity is going to be very tight in the later part of this month (December), and continuing into January and perhaps into February," Das said at a post-policy press conference. "So, it was time to normalise the CRR."

Quarterly payments for advance tax are expected to draw out over INR 1 trillion in mid-December. On Thursday, surplus liquidity in the banking system already narrowed down to INR 423.70 billion from INR 2.84 trillion a month ago. Until Nov. 19, banking system liquidity was in a surplus above INR 1.00 trillion. Since then, goods and services tax payments, as well as the RBI's large dollar sales in the second half of November, sharply pulled down system liquidity even into deficit.

Das also highlighted the likelihood of an increase in currency in circulation on account of a busy credit season which will coincide with increased agricultural activity. Going forward, the RBI will remain nimble and proactive in its liquidity management operations to ensure that money market rates evolve in an orderly manner and the rates do not diverge much from the RBI's repo rate of 6.50%, he said. 

Reported by Vidhushi RajPurohit

Edited by Avishek Dutta

PREMATURE TO COMMENT ON TRUMP'S TARIFF THREATS, SAYS RBI DAS

It is premature to comment on the US President-elect Donald Trump's threat to impose 100% tariffs on exports from BRICS nations, Reserve Bank of India Governor Shaktikanta Das said Friday, adding that the bloc has not taken any step towards de-dollarisation.

"The BRICS currency was an idea raised by one of the member countries, and it was a discussion. No decision has been taken," Das said, addressing a post-monetary policy press conference on Friday. "The geographical spread of the countries is also a factor that has to be taken for consideration," Das said. In 2023, the then Brazilian President Luiz Incio Lula da Silva proposed looking at the feasibility of a new common BRICS currency. 

Trump had last week threatened against the BRICS move. "We need a commitment from these countries that they will neither create a new BRICS currency nor back any other currency to replace the mighty US dollar, or they will face 100% tariffs....they can go find another sucker," Trump said Saturday, in a post on the social media platform Truth Social, owned by him. 

BRICS, an inter-governmental organisation, comprises Brazil, Russia, India, China, South Africa, Iran, Egypt, Ethiopia, and the United Arab Emirates.

Das said while no step has been taken towards de-dollarisation, dependency on one currency is also problematic. 

"As far as de-dollarisation is concerned, as for India, there is absolutely no step that India has taken," Das said, adding that rupee vostro accounts were aimed at de-risking India's trade. "All we have done is permitting the opening of vostro accounts and have entered into deals with two countries now to deal with local currencies to de-risk our trade"

Trump's threat also comes at a time when the Indian government has been making a case for the rupee to be a hard currency and part of the world's currency system in the long run. "We will harden the Indian rupee over time so that it gets used more widely," Sanjeev Sanyal, member of the Economic Advisory Council to the Prime Minister had told Informist in an interview. "Presumably other countries will use it in Indian bonds or foreign exchange reserves," he had said, while adding that the move has nothing to do with de-dollarisation.  

Reported by Priyasmita Dutta

Edited by Saji George Titus

FX RESERVES STILL QUITE ROBUST; MOST DECLINE ON VALUATION LOSSES

India's foreign exchange reserves are quite robust even now and a good part of the depletion in reserves is owing to valuation losses, Reserve Bank of India Governor Shaktikanta Das said on the sharp fall in forex reserves in the last two months. "FX reserves are still quite adequate. We are confident of dealing with any spillovers," Das said at the post-policy conference on Friday.

India's foreign exchange reserves fell to a near five-month low of $656.58 billion in the week ended Nov. 22. The reserves have now declined by over $48 billion from the record high of $704.89 billion late in September. Market participants have attributed the recent slump in reserves primarily to the central bank's active intervention through dollar sales in the domestic spot market and in some part to revaluation losses.

Earlier in the day, while detailing the December policy outcome, the governor said foreign exchange reserves are deployed judiciously to mitigate undue volatility, maintain market confidence, anchor expectations and preserve overall financial stability. The RBI's intervention in the foreign exchange market focusses on smoothening excessive and disruptive volatility rather than targeting any specific exchange rate level or band, Das said.

His comments come at a time when the RBI has ramped up its intervention in the forex market to support the rupee, which has come under strong pressure and has been hitting successive record lows due to a globally strengthening dollar and foreign portfolio investor outflows after Donald Trump got re-elected as the US president. The rupee has depreciated nearly 0.8% since the US election, to a record low of 84.7700 against the dollar on Tuesday.

Das stated that both the depreciation of the rupee and its volatility have been less compared to its emerging market peers, reflecting India's strong macroeconomic fundamentals and improvement in the external sector outlook.

"Our overall approach ensures that forex reserves act as shock absorbers, safeguarding the economy from external spillovers, while supporting competitive and orderly market conditions," Das said. He said the central bank's exchange rate policy has remained consistent over the years, and is market-determined. Its central tenet is to maintain orderliness and stability, without compromising market efficiency.

Das said that the RBI has combined market discipline with prudent intervention in the foreign exchange market, which has created a system that supports stability, resilience and growth. "The flexible or market determined exchange rate regime is not merely a tool for managing external shocks; it is an important element of our approach to macroeconomic and financial stability," he added.

The governor also highlighted that the RBI's efforts to deepen and modernise the foreign exchange market have yielded significant results in terms of widening access and participation, and ensuring efficient price discovery.

Talking about the external sector, Das said that robust services exports and strong remittance receipts are expected to keep India's current account deficit within sustainable levels in 2024-25 (Apr-Mar). India's current account deficit was $9.74 billion in Apr-Jun, against a surplus of $4.59 billion in Jan-Mar and a deficit of $8.95 billion in the first quarter of 2023-24 (Apr-Mar). In percentage terms, the current account deficit in Apr-Jun amounted to 1.1% of GDP, slightly higher than 1.0% in Apr-Jun 2023. 

Reported by Pratiksha

Edited by Ashish Shirke

RBI HIKES COLLATERAL-FREE AGRI LOAN LIMIT TO INR 200,000

The Reserve Bank of India has increased the limit for collateral-free agriculture loans to INR 200,000 per borrower from 160,000 earlier, RBI Governor Shaktikanta Das said at the conclusion of the Monetary Policy Committee's three-day meeting on Friday.

"Keeping in view the overall inflation and rise in agricultural input costs since then, it has been decided to raise the limit for collateral-free agriculture loans from 1.6 lakh (INR 160,000) to 2 lakh (INR 200,000)," he said. The limit for collateral-free agriculture loans was last revised in 2019, where the limit was increased from INR 100,000. 

In a separate circular, the central bank asked banks to implement the revised instructions by Jan. 1.  End

Reported by Kshipra Petkar

Edited by Namrata Rao

AIM IS TO ENSURE ORDERLY CONDUCT OF BUSINESS BY BANKS – SWAMINATHAN

The Reserve Bank of India's focus is to ensure orderly conduct of business by banks, and it is for them to decide on growth and product mix, Deputy Governor Swaminathan J. said on Friday. "Our instructions are aimed towards ensuring orderly conduct of this business. Growth and product mix is something which is essentially left to the banks' wisdom to pursue," Swaminathan said at the post-monetary policy committee press conference.

"What is more important for us is to ensure that there is fairness in their conduct towards customers and the appropriate norms relating to LTV (loan-to-value), repayment obligations, among others, are being adhered to in a fair and transparent manner," the deputy governor said responding to a question on rising gold loans.

Swaminathan said the RBI will remain watchful of incoming data and if some action is warranted, then it will be taken at the appropriate time. As per the RBI's sectoral deployment data, growth in loans against gold jewellery jumped 56.2% on year as of Oct. 18 from 13.1% a year ago.

While reviewing the guidelines and practices followed by regulated entities in September, the RBI had found instances of valuation of gold being done without the presence of the customer and shortcomings in the use of third parties for sourcing and appraisal of loans and asked companies to closely monitor their gold loan portfolios and review their policies and to identify gaps.

On rising delinquencies in the microfinance sector, Swaminathan said the RBI has asked banks to strengthen their underwriting standards and to step up their collection efforts to ensure that the stress does not translate into non-performing assets. "At the system level it is still not a big concern, 20-30 bps uptick in stress is something which we are confident that the entities will be able to handle. And, in certain entities, where the numbers are little higher, we will deal with it on a bilateral basis. We will examine the steps they are taking and ensure that the stress is not widespread," he said.

Swaminathan said the self-regulatory organisations in the microfinance segment are taking adequate steps to adhere to the prudential guidelines laid down by the central bank. "They (microfinance institutions) need to ensure that the household income assessment and the repayment obligation towards monthly income are strictly adhered to. They also need to avoid the 'push' effect and respond to the demand rather than give loans to achieve some target," he said. 

Reported by Kshipra Petkar

Edited by Saji George Titus

HAVE TO PROCEED CAREFULLY ON PROJECT FINANCE, LCR NORMS, SAYS DAS

The Reserve Bank of India has to proceed carefully with the implementation of project finance and the new liquidity coverage ratio measures, Governor Shaktikanta Das said at the post-monetary policy press conference Friday. "We have followed a very consultative approach. These will bring about significant changes in the banking system, so we are proceeding in a very careful and calibrated measure, taking into account suggestions by all stakeholders so that implementation is as non-disruptive as possible," Das said.

Deputy Governor M. Rajeswar Rao said that the RBI had received significant feedback on both project financing and the new liquidity coverage ratio norms. However, he refused to give a definite timeline on the rollout of these norms.

In an interview in October, Governor Shaktikanta Das had said that Indian banks had asked the RBI to either delay or implement the new liquidity coverage ratio norms in a phased manner. "We have received a number of suggestions from banks, the Indian Banks' Association... Some of them want this not to be done at the moment. Some of them want a longer period, longer phasing of the entire thing," Das said.

On Jul. 25, the RBI's draft guidelines--comments on which were invited by Aug. 31--proposed that banks should assign an additional 5% run-off factor to internet and mobile banking-enabled retail deposits. It also proposed, among other changes, tighter norms to value high-quality liquid assets of banks. Currently, banks must maintain high-quality liquid assets worth 100% of their expected outflows for the next 30 days. According to bankers and analysts, the changes proposed by the RBI are seen pushing up expected outflows, an increase in the requirement of high-quality liquid assets--which primarily includes government securities--and finally, lower growth in bank loans.

Informist had exclusively reported in October that the government's Department of Financial Services had written to the RBI to stagger the implementation of the proposed liquidity coverage ratio norms. The new regulations, as per the draft, are to come into effect starting 2025-26 (Apr-Mar).

In the case of project finance norms, too, Informist had exclusively reported, quoting a senior official, that the finance ministry had written to the RBI suggesting a complete rethink on the draft norms which threaten to tighten funding for infrastructure projects.

On May 3, the RBI proposed tighter guidelines on project financing by banks and non-banking finance companies to avoid large defaults on infrastructure loans. As per the draft norms proposed by the central bank, lenders would have to make provisions of up to 5% of the outstanding exposures during construction, as against 0.4% currently, which would be reduced to 2.5% once the asset turns operational. 

Reported by Kabir Sharma

Edited by Ashish Shirke

UNVEILS PODCAST SERVICE FOR WIDER DISSEMINATION OF INFORMATION

The Reserve Bank of India proposed to launch podcast services to promote wider dissemination of information, Governor Shaktikanta Das said in the monetary policy statement Friday. 

"Over the years, the Reserve Bank has expanded its communication toolkit and techniques to enhance transparency and better connect with the people," Das said. The regulator aims to continue its effort to reach a wider audience through the initiative of podcasts, he added. 

Das further said at the post-monetary policy press conference that podcasts cater to situations when a detailed interview or press conference is not required, and you want to talk about a particular issue or to explain new measures to the people. Also, he added that podcasts have a wide viewership among youngsters and the RBI wants to be ahead of the curve to communicate to a wider cross-section of people. 

Reported by Christina Titus 

Edited by Tanima Banerjee

INTEREST RATE CEILING ON 1-5 YR FCNR(B) DEPOSIT HIKED BY 150 BPS

The Reserve Bank of India on Friday raised the interest rate ceilings on Foreign Currency Non-Resident Accounts (Banks) (FCNR[B]) deposits from 1 year to five years by 150 basis points. Announcing the December Monetary Policy Committee outcome, Governor Shaktikanta Das said the interest rate ceilings have been increased to attract more capital inflows.

Banks are now allowed to raise fresh FCNR(B) deposits between 1 year and less than 3 years at rates not exceeding the overnight alternative reference rate plus 400 bps compared with 250 bps earlier. For deposits of 3 to 5 years, the ceiling has been increased to the overnight alternative reference rate plus 500 bps against 350 bps earlier. This relaxation in FCNR(B) deposit rates will be available till March 31, Das said.

An FCNR(B) account is a specialised banking facility designed to cater to the financial requirements of Non-Resident Indians and Persons of Indian Origin. It is denominated in foreign currencies, providing account holders with the ability to save their overseas income in foreign currencies."

Addressing a post-policy press conference, Das said the hike in the ceiling was a "facilitation that we have provided to attract more inflows and (provide) opportunity to NRIs to invest".  

Reported by Pratiksha

Edited by Saji George Titus

INTRODUCES MULEHUNTER.AI TO IDENTIFY MULE ACCOUNTS

The Reserve Bank of India introduced MuleHunter.ai, an advanced artificial intelligence and machine learning model developed by Reserve Bank Innovation Hub in Bengaluru, to tackle the growing menace of mule bank accounts and digital fraud, Governor Shaktikanta Das said in his monetary policy statement detailed Friday. 

First introduced during the Global Fintech Fest in August, MuleHunter.ai represents a shift in the way financial institutions can identify suspicious activities. Unlike conventional fraud detection systems that rely on predefined rules, MuleHunter.ai continuously learns from data, enabling it to adapt and evolve in response to increasingly fraudulent methods. Additionally, by improving detection capabilities, MuleHunter.ai will enhance the traceability of illicit funds and strengthen the financial system's defences against online financial crimes.

Mule accounts are typically used to launder the proceeds of crime, with fraudsters recruiting unsuspecting individuals to act as "mules" by using their bank accounts to receive or transfer illicit funds. These accounts, which often operate under false identities or third-party names, are commonly linked to money laundering, tax evasion, and other financial crimes. The difficulty in detecting these accounts stems from the fact that they are often opened by legitimate individuals who unwittingly assist in illegal activities, making detection challenging during the onboarding process.

Moreover, mule accounts violate several laws, including the Prevention of Money Laundering Act, and are in direct contravention of RBI and Securities and Exchange Board of India guidelines. To address this challenge, MuleHunter.ai aims to leverage AI and ML technologies, which can identify mule accounts more effectively than traditional rule-based detection systems. This AI-driven model could enable banks to detect fraudulent accounts swiftly and with greater accuracy, ultimately safeguarding the integrity of the financial system.

The RBI has been working closely with the Indian Cyber Crime Control Centre, under the Ministry of Home Affairs, and other regulatory agencies to combat the rise of cybercrime. According to the National Crime Records Bureau, online financial frauds accounted for 67.8% of all cybercrime complaints in the second quarter of 2025. Between 2020 and 2022, cyber fraud cases surged by 31%, with over 150,000 cases registered in 2022 alone.

At a press conference after the Monetary Policy Committee outcome, Deputy Governor T. Rabi Sankar provided clarity on the MuleHunter initiative. He said MuleHunter is an infrastructure-level platform being developed by the central bank, and it would integrate data from all banks and payment system operators. Its AI engine would be trained on the comprehensive dataset to more effectively detect fraud within the financial system, he said.

Highlighting the growing concerns around fraud, Sankar said, "The number of frauds are increasing...the amount involved in fraud are increasing, although the number of frauds per transaction is coming down over the years. But the number is increasing fast enough for us to be concerned about it." 

He emphasised that each entity remains free to continue using its own fraud prevention systems and is encouraged to innovate based on its own expertise and AI capabilities. The purpose of MuleHunter, he explained, is to provide an infrastructure-level solution that can be used by all players, particularly smaller banks or institutions that may not have the resources to develop such sophisticated systems. Even for larger institutions, it would serve as an additional tool that can complement and enhance their existing fraud detection framework, Sankar said. 

Reported by Sachi Pandey

Edited by Namrata Rao and Avishek Dutta

PROPOSES TO LINK FX RETAIL PLATFORM WITH BHARAT CONNECT

In a bid to improve the accessibility of the FX-Retail platform, the Reserve Bank of India on Friday proposed its linking with Bharat Connect, earlier known as Bharat Bill Payment System.

"The linkage will enable users to register and transact on the FX-Retail platform through the apps of banks (mobile applications, internet banking, among others) and non-bank payment system providers, which are integrated with Bharat Connect," Das said, detailing the December Monetary Policy Committee's meeting outcome.

FX-Retail is an electronic trading platform, launched by the Clearing Corporation of India Ltd. in 2019 for trading in the foreign exchange market. The platform can be accessed via internet to place buy/sell orders in the dollar/rupee pair as per requirement. Available contracts on the platform are CASH (same day currency settlement), TOM (next day currency settlement), SPOT (trade plus two days currency settlement) and FORWARD (beyond SPOT currency settlement) instruments up to a period of 13 months, including broken dates and Option period (not exceeding a period of 30 days), according to the CCIL website.

The linkage with Bharat Connect would be undertaken in phases, Das said. In the first phase, a pilot scheme would be undertaken, facilitating the purchase of US dollars against rupees by individuals and sole proprietors. Going forward, the scope of trade will be expanded to other categories of users, and allow other FX transactions, including the sale of US dollars against the rupee.

During all this, users will continue to have access to the FX-Retail platform, with the existing trading mechanism in place. Banks will be issued instruments on the operational aspects of the pilot.  

Reported by Sourabh Kumar

Edited by Namrata Rao

PROPOSES TO INTRODUCE NEW BENCHMARK SECURED OVERNIGHT RUPEE RATE

The Reserve Bank of India on Friday proposed to introduce a new benchmark, the Secured Overnight Rupee Rate, or the SORR, to further develop the interest rate derivative market and improve the credibility of interest rate benchmarks, Governor Shaktikanta Das said, detailing the December Monetary Policy Committee's meeting outcome.

"With a view to further develop the interest rate derivatives market in India and improve the credibility of interest rate benchmarks, the Reserve Bank proposes to introduce a new benchmark--the Secured Overnight Rupee Rate (SORR)--based on all secured money market transactions, overnight market repo as well as TREPS," Das said. 

In October, the committee on the Mumbai Interbank Offered Rate, or MIBOR, benchmark recommended that Financial Benchmarks India Ltd. construct a new overnight market benchmark based on secured money market rates. The overnight MIBOR is the current benchmark for money market rates, which is also computed by Financial Benchmarks India. The weighted average call rate is the operating target for the Reserve Bank of India's monetary policy. Now, the RBI has requested Financial Benchmarks India to take the proposal forward for the secured overnight rupee rate. 

The committee in October also made other recommendations such as the development of an interest rate derivative based on the secured overnight rupee rate. Further, it recommended that non-residents should be allowed access to onshore interest rate derivatives markets beyond MIBOR OIS, for purposes other than hedging, gradually and with appropriate controls.

The committee also suggested a shift to lending based on market-determined rates, rather than those linked to the policy repo rate, which will allow banks to better hedge their risks. These other recommendations of the committee are under consideration, the RBI said. 

Reported by Kabir Sharma

Edited by Namrata Rao

TO SET UP COMMITTEE TO FORM FRAMEWORK FOR ETHICAL USE OF AI

A committee comprising experts will be set up to recommend a Framework for Responsible and Ethical Enablement of AI in the financial sector, Reserve Bank of India Governor Shaktikanta Das Friday said while announcing the outcome of the Monetary Policy Committee meeting.

"While the benefits are many, the attendant risks like algorithmic bias, explainability of decisions, data privacy, among others, are also high. To harness the benefits, it is critical to address the attendant risks early in the adoption cycle," Das said. The details of the committee will be notified separately. 

Reported by Kshipra Petkar

Edited by Akul Nishant Akhoury

RBI ALLOWS SMALL FINANCE BANKS TO EXTEND CREDIT LINES ON UPI

Small Finance Banks can now extend pre-sanctioned credit lines through the Unified Payments Interface, Reserve Bank of India Governor Shaktikanta Das said in the monetary policy statement Friday. Earlier, this facility was allowed only for scheduled commercial banks.

Das said that the initiative has been taken to further deepen financial inclusion and enhance formal credit, particularly for 'new to credit' customers.

Credit line on Unified Payments Interface was introduced in September 2023 and it enabled individuals and small business owners to obtain pre-sanctioned credit lines from banks, which could be used immediately for transactions through the Unified Payments Interface. 

Reported by Christina Titus 

Edited by Avishek Dutta

End

Compiled by Mayur Nijap and Shivaji Jagatap

Filed by Ashish Shirke

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