RBI’s Monetary Policy Committee (MPC) meeting (6th Oct. ‘23)
- MPC decides unanimously to keep repo rate unchanged at 6.50%?
- Focus continues on ‘withdrawing accommodation’ to control inflation
- 10% Incremental-CRR which impounded 1.1 lakh crore is being discontinued w.e.f. 7th Oct
- RBI reiterated the 4% inflation target and its resolve to take ‘timely measures to align inflation to target’ and ‘anchor inflationary expectation’
- MPC action is as per the markets expectations and there is a marginal impact?on equity markets
- However, 10 year G-Sec Yield is 9 bps up at 7.30% (as of 11:50 AM) due to possibility of OMO sales and rising US treasury yields
- Rate cut is ruled out until Aug. ‘24 and FY ‘24 inflation will be slightly above RBI’s projections as inflation is expected to remain above 5% and there are risk to inflation while the growth is resilient
- Globally we are at the end of rate hike cycles on the back of growth losing momentum. However while the inflation has fallen it remain well above target and hence any rate cut is unlikely before middle of the next year?
Additional points on Developmental and Regulatory Policies
- Governor warned that ‘very high growth in Personal Loan is being closely monitored by RBI? for any signs of incipient stress’. Banks & NBFCs were advised ‘robust risk management, stronger under-writing standards’ & strengthening surveillance to address risk build-up???
- Base & middle layer NBFCs to be allowed to use Credit Risk Mitigation (CRM) instruments for risk transfer in large counterparty exposures?
- Introduction of ‘Card-on-File Tokenization (CoFT) creation facilities directly at the issuer bank level’, to enhance customer convenience to ‘get tokens created and linked to their existing accounts with various e-commerce applications’?