MPC Decision and development policies

 MPC decides status quo

MPC meeting decisions and communications in a nutshell:

1. Repo rate uunchanged at 6.5%. Stance also is unchanged as "remaining focused on withdrawal of accommodation to ensure that inflation progressively aligns with the target, while supporting growth".  Clear indication that RBI wants bank credit growth should moderate, especially where credit risk weights have been revised.

2. RBI also conveys that liquidity strains are not witnessed. The deficit has not crossed 1% of DTL (Rs.2.5 lac cr.) even in peak times. The Governor outlined the strategy to manage liquidity: VRR will be used to pump in liquidity, when there is deficit and VRRR will be used, when it feels there is a need  correct low level overnight lending rates.

Statement on development and regulatory policies announced by RBI. 

Three are found interesting.

1 KFS (Key Financial Starement) for retail and MSME loans & advances: This is already in vogue for personal and micro loans. Providing KFS will help borrowers to understand effective annual interest rate (EMI/No EMI) and effective cost of borrowings including proceesing charges, documentation charges, information collecting charges etc. Penalty for non submission of data/delayed payment etc will also be displayed in one sheet of KFS for borroqer's easy understanding of all financial implications of the loan borrowed in one pager.

2. Enhancing the robustness:of AePS: 37 cr. transactions in assisted mode in a year using AePS is a huge number. Measures like mandatory due diligence for AePS touchpoint operators, streamlining onboarding processes as additional fraud risk measures will certainly enhance the security of the transactions carried out in AePS.

3. Digital Framework for authentication of digital payment transactions Development of alternative authentication mechanisms, in addition to SMS based OTP, as 2FA is avery good move to eliminate frauds that are possible, when the device is in the hands of the fraudster.

Regards 

V. Viswanathan

8th February2024

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