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Informist, Wednesday, Apr. 9, 2025

 

MUMBAI - Following are the top 10 announcements made by Reserve Bank of India Governor Sanjay Malhotra on Wednesday in his address at the conclusion of the Monetary Policy Committee's first bi-monthly meeting for 2025-26 (Apr-Mar):

 

INTEREST RATES

The RBI's Monetary Policy Committee unanimously decided to cut the policy repo rate by 25 basis points to 6.0%. Consequently, the Standing Deposit Facility rate comes down to 5.75%, while the Marginal Standing Facility now stands at 6.25%

 

POLICY STANCE

The MPC unanimously voted to change the policy stance to 'accommodative' from the 'neutral' stance adopted in October, and also noted that the rapidly evolving situation requires continuous monitoring and assessment of the economic outlook. Today's change in stance means that going forward, absent any shocks, the MPC is considering only two options - status quo or a rate cut.

 

GROWTH

The RBI cut its GDP growth projection for 2025-26 (Apr-Mar) to 6.5% from 6.7%. The central bank also cut its growth estimates for three of the four quarters of the current fiscal year, with the Apr-Jun GDP estimate revised to 6.5% from 6.7%, that for Jul-Sept lowered to 6.7% from 7.0%, and that for Jan-Mar of 2026 cut to 6.3% from 6.5%. The risks are evenly balanced.

 

INFLATION

CPI inflation for 2025-26 (Apr-Mar) is projected at 4.0%, with Apr-Jun at 3.6%; Jul-Sept at 3.9%; Oct-Dec at 3.8%; and Jan-Mar at 4.4%, with risks evenly balanced.

 

LIQUIDITY

In January, system liquidity faced a deficit, and the RBI injected INR 3.1 trillion through the liquidity adjustment facility to mitigate the shortage. However, following a series of measures injecting approximately INR 6.9 trillion, the liquidity deficit narrowed during Feb-Mar. By Mar. 29, 2025, the system liquidity had transitioned into a surplus.

The surplus further expanded as the government spending accelerated in the latter half of March, resulting in a liquidity surplus of INR 1.5 trillion as of Apr. 7. The RBI remains committed to maintaining sufficient system liquidity and will continue to closely monitor liquidity and financial market conditions, taking proactive measures to ensure adequate liquidity.

 

EXTERNAL SECTOR
India's services exports demonstrated resilience in Jan-Feb, driven by strong performance in software, business, and transportation services. Looking ahead, net services and remittance receipts are expected to maintain a significant surplus, which will partially offset the trade deficit. The current account deficit for 2024-25 and 2025-26 are projected to remain within sustainable levels.

 

FINANCIAL STABILITY

The financial soundness parameters of India's banking sector continue to be robust, with a liquidity buffer well above the regulatory threshold. Profitability indicators are also healthy, reflecting robust operational efficiency of the system. Similarly, the system-level parameters of non-banking financial companies are sound, indicating a stable financial environment.

To further strengthen the financial system, the RBI has proposed to enable the securitisation of stressed assets through a market-based mechanism. This will complement the existing asset reconstruction company route under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002.

 

GOLD LOANS REGULATIONS

Gold loans, which are extended by regulated entities against the collateral of gold jewellery and ornaments, are used for both consumption and income-generation purposes. To ensure consistency and clarity across different types of regulated entities, comprehensive regulations will be issued on prudential norms and conduct-related aspects for such loans, taking into account their varying risk-bearing capabilities.

 

PARTIAL CREDIT ENHANCEMENT 

To ensure consistency across regulated entities, comprehensive guidelines are proposed to harmonise regulations governing non-fund-based facilities. Additionally, instructions related to partial credit enhancement by regulated entities will be revised, aiming to expand funding sources for infrastructure financing.

 

NPCI

The central bank has made two announcements regarding the National Payments Corp. of India's role in regulating UPI (Unified Payments Interface) transactions and the regulatory sandbox framework. The RBI has allowed NPCI to now decide transaction limits for person-to-merchant UPI transactions in consultation with banks and stakeholders. Also, the regulatory sandbox will become theme-neutral and "on-tap".   End

 

Compiled by Vaishali Tyagi

Edited by Tanima Banerjee

 

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