RBI Monetary Policy: 17 things you should know about Repo Rate

The Reserve Bank of India's (RBI) Monetary Policy Committee on Friday unanimously decided to keep key repo rate unchanged at 4%. The repo rate or the short-term lending rate was last cut on May 22, 2020. Since then, the rate remains at a historic low of 4%.

With RBI maintaining status quo, banks most likely will not increase interest rates on loans in immediate future. This is the 11th time in a row that the Monetary Policy Committee (MPC) headed by RBI Governor Shaktikanta Das has maintained the status quo. It also maintained its stance 'accommodative' while focusing on the withdrawal of accommodation to control inflation while supporting growth. 

Marginal standing facility, that is MSF rate and bank rate will remain unchanged at 4.25%. Further, it has been decided by Reserve Bank to restore the width of liquidity adjustment facilities, that is LAF corridor to 50 basis points, the position that prevailed before the pandemic.

Read | RBI Monetary Policy LIVE Updates 2022: Key policy rates, including repo and reverse repo rates unchanged

Key points on the policy

1. The Reserve Bank of India (RBI) revised upwards its retail inflation forecast to 5.7% for the current financial year 2022-23, compared with the 4.5% projected earlier.

2. Key commodity prices may remain on the higher side and input costs will be high across sectors due to the ongoing geopolitical tensions amid the Russia-Ukraine war.

3. RBI Governor Shaktikanta Das said the Central bank expects crude oil prices at USD 100 per barrel for the current financial year 2022-23.

4. The RBI is mandated to keep inflation within the range of 2-6%. The CPI-based inflation rate in February stood at 6.07%, the rate in January was 6.01%.

5. RBI lowered its GDP forecast to 7.2% for the current financial year 2022-23, compared with the 7.8% projected in the previous bi-monthly policy statement in February.

6. Governor said the real GDP is projected to grow 16.2% in the first quarter and 6.2% in the second quarter, 4.1% in Q3 and 4% in the fourth quarter of FY23.

7. The growth projections have been made considering the crude oil prices at USD 100 per barrel for the current financial year, Shaktikanta Das said

8. He added the supply of crude oil, natural gas, commodities and metals like palladium has been affected due to the Russia-Ukraine war.

9. It will rationalise the risk weights and continue to link home loans only with loan-to-value (LTV) ratios for new home loans till March 31, 2023.

10. The move is expected to keep the new housing loans sanctioned cheaper. This will facilitate higher credit flow for individual housing loans.

11. The RBI proposed to make cardless cash withdrawal facility available across all banks and ATM networks using the Unified Payment Interface (UPI).

12. Currently, the facility of cardless cash withdrawal is limited only to a few banks. This will ease transactions and help prevent frauds like card skimming, card cloning.

13. RBI proposed to reduce the net worth requirement of entities like Bharat Bill Payment System (BBPS) from Rs 100 crore to Rs 25 crore.

14. This will facilitate greater penetration of bill payments through it and will encourage participation of a greater number of non-bank Bharat Bill Payment operating units in the BBPS.

15. Bharat Bill Payment System (BBPS), an interoperable platform for bill payments, has seen an increase in the volume of bill payments and billers over the years.

16. The Reserve Bank of India also proposed to issue guidelines on 'Cyber Resilience and Payment Security Controls for Payment System Operators'.

17. It is in an effort to ensure payment systems remain resilient to conventional and emerging risks, specifically those related to cybersecurity. Das said.