RBI Monetary Policy: 4.9% repo rate, 6.7% projected inflation, and more numbers

EMIs for loans – including home and auto – are set to increase after the Reserve Bank of India voted ‘unanimously’ Wednesday to increase the key interest rate by 50 basis points to 4.9%. This is the second increase in five weeks – after the 40 point hike after May’s off-cycle meeting – as the RBI tries to control inflation figures projected over its upper tolerance level of 6%. Projected inflation for this fiscal year (2022/23) is 6.7%. Projected real GDP growth stays at 7.2%.What were the big numbers after the RBI’s monetary policy committee meet?4.9% repo rateAfter last month’s surprise off-cycle meet, the central bank once again hiked the repo rate – this time by 50 basis points. The SDF, or standing deposit facility, rate and the MSF, or marginal standing facility, rate have been adjusted higher by the same quantum to 4.65% and 5.15%, respectively.RBI raises benchmark repo rate by 50 basis points to 4.90% amid rising inflationOne basis point is one-hundredth of a percentage point. And the repo rate refers to the rate at which commercial banks borrow money by selling their securities to the RBI.The reverse repo is the rate at which the central bank borrows money.The aggressive stance comes amid grim prognosis of geo-political uncertainties over the war in Ukraine, continuing supply-chain disruptions, and rising energy and food prices.Govt prepared to handle challenges for economy: Chief economic adviser2nd consecutive repo rate hikeTwo successive rate hikes point to withdrawal of accommodative policies to fuel growth.Reserve Bank hikes rates for 2nd straight month; no ‘accommodative’ in stanceThe central bank had slashed the repo rate by a total of 115 bps since March 2020 to soften the blow from the COVID-19 crisis. However, in an unscheduled meeting last month the RBI hiked the key rate by 40 basis points – its first increase after holding it steady at 4% (a record low) 11 consecutive times.RBI raises repo rate by 40 basis points to 4.40% as inflation bites7.2% GDP Real GDP growth has been estimated at 16.2% in Q1 of this fiscal year and then dropping to 6.2%, in Q2, 4.1% in Q3, and 4% in Q4. RBI maintains India’s GDP growth estimate at 7.2% for 2022-23The overall growth projection is maintained from April, when the RBI slashed 2022/23 GDP growth projection to 7.2 per cent from 7.8 per cent.6.7% inflationInflation will likely remain above the RBI’s upper tolerance band until December, governor Shaktikanta Das was quoted by news agency PTI. Inflation to hover around 6.7% for 2022/23, well above RBI’s target bandHe also said 75 per cent of the increased inflation forecast could be linked to an increase in food prices due to the war in Ukraine.In April the monetary policy committee, or MPC, raised its inflation forecast for the current fiscal to 6.7% from the April prediction of 5.75 but retained growth projections at 7.2 per cent.Consumer prices accelerated to an eight-year high of nearly 7.8% in April.To balance inflation-growth dynamics, the RBI will focus on withdrawal of accommodation – while also ensuring adequate support for growth – as system liquidity continues to be high. ₹10.4 lakh crore processed through UPIThe RBI has proposed allowing the linking of credit cards to the Unified Payments Interface (UPI) platform. This will start with the indigenous RuPay credit cards, the bank said.”UPI has become the most inclusive mode of payment in India with over 26 crore unique users and five crore merchants on the platform. In May 2022 alone, about 594 crore transactions amounting to ₹10.4 lakh crore were processed through UPI,” the RBI governor said.RBI to soon link credit cards to UPI platform | What it means for users ₹15,000 upper limit for e-mandatesThe limit for e-mandate on cards for recurring payments – such as subscriptions for streaming services like Netflix, payment of phone bills or utilities, or that of insurance premia and education fees – have been enhanced to ₹15,000 per transaction from the earlier limit of ₹5,000.Other measures include raising of limit for individual housing loans by urban cooperative banks (UCBs) and rural cooperative banks (RCBs) by over 100%.RCBs have also been allowed to extend loans to residential housing projects and UCBs can extend doorstep banking services to their customers.With input from ANI, AFP, PTI

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