RBI has decided to widen the scope of the framework for resolution of stressed assets, under which all the regulated entities including cooperative lenders will now be able to execute “compromise settlements and technical write-offs” to resolve non-performing assets, Das said.

Till now, this avenue for dud asset resolutions was available only with scheduled commercial banks and select non-bank finance companies, Das said, adding that comprehensive guidelines on the same will be released soon.

It can be noted that the cooperative lending sector frequently makes headlines for lack of governance practices and conflicts of interest.

Das also said that it is proposed to rationalise the extant prudential norms on restructuring of borrower accounts affected by natural calamities.

The Governor also acknowledged that a need has arisen to ease the implementation challenges faced by other UCB (urban cooperative banks) on the priority sector lending targets, and announced to extend the timelines for achieving the targets by two more years up to March 2026.

Lenders which have met the targets as on March 31, 2023 shall be suitably incentivized, he added.

To further facilitate orderly development of the digital lending ecosystem and enhance credit penetration in the economy, the RBI has decided to introduce default loss guarantee arrangements in digital lending.

“With a view to further promoting responsible innovation and prudent risk management, it has been decided to issue guidelines on Default Loss Guarantee arrangements in Digital Lending,” Das said.

RBI has decided to rationalise and simplify the licensing framework for authorized persons under Foreign Exchange Management Act (FEMA), 1999, to improve the efficiency in the delivery of foreign exchange facilities to various segments of users including common persons, tourists and businesses, Das said.

To further enhance the efficiency of the Bharat Bill Payment System and to encourage greater participation, RBI has proposed to streamline the process flow of transactions and membership criteria for operating units, Das said.

With a view to providing greater flexibility for managing liquidity, it has been decided that scheduled commercial banks excluding Small Finance Banks can set their own limits for borrowing in Call and Notice Money Markets within the prescribed prudential limits for inter-bank liabilities, Das said.

Source: PTI

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In April, the central bank had marginally revised upwards the 2023-24 GDP growth projection to 6.5 per cent, from its earlier forecast of 6.4 per cent.

Domestic demand condition remains supportive of growth and also the demand in rural areas is on the revival path, RBI Governor Shaktikanta Das said while announcing the 2nd bi-monthly policy for 2023-24.

India’s economy grew 6.1 per cent in the fourth quarter of 2022-23, pushing up the annual growth rate to 7.2 per cent, as against 7 per cent anticipated earlier.

Das said the higher rabi crop production in 2022-23, the expected normal monsoon, and the sustained buoyancy in services should support private consumption and the overall economic activity in the current year.

The government’s thrust on capital expenditure, moderation in commodity prices and robust credit growth are expected to nurture investment activity, said the Monetary Policy Statement, 2023-24.

Weak external demand, geo-economic fragmentation, and protracted geopolitical tensions, however, pose risks to the outlook, it added.

“Taking all these factors into consideration, real GDP growth for 2023-24 is projected at 6.5 per cent with Q1 at 8 per cent, Q2 at 6.5 per cent, Q3 at 6 per cent, and Q4 at 5.7 per cent, with risks evenly balanced,” the governor said.

Das said, in the second quarter of 2023, the global economy is sustaining the momentum gained in the preceding quarter in spite of still elevated though moderating inflation, tighter financial conditions, banking sector stress, and lingering geopolitical conflicts.

Source: PTI

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In April, the Reserve Bank had estimated the consumer price index (CPI) based retail inflation at 5.2 per cent during the fiscal 2023-24.

CPI inflation fell sharply to 4.7 per cent in April 2023, from 6.4 per cent in February, on the back of favourable base effects, with softening observed across all the three major groups.

“In India, consumer price inflation eased during March-April 2023 and moved into the tolerance band (2-6 per cent), declining from 6.7 per cent in 2022-23.

“Headline inflation, however, is still above the target as per the latest data and is expected to remain so according to our projections for 2023-24,” Das said while announcing the second bi-monthly monetary policy of 2023-24.

Therefore, close and continued vigil on the evolving inflation outlook is absolutely necessary, especially as the monsoon outlook and the impact of El Nino remain uncertain, he said.

The Reserve Bank of India (RBI) has projected the CPI inflation at 5.1 per cent for 2023-24 — Q1 at 4.6 per cent, Q2 at 5.2 per cent, Q3 at 5.4 per cent and Q4 at 5.2 per cent — with risks evenly balanced.

“At the same time, given the uncertainties, we need to maintain “Arjuna’s eye” on the evolving inflation scenario. Let me re-emphasise that headline inflation still remains above the target and being within the tolerance band is not enough. Our goal is to achieve the target of 4.0 per cent, going forward,” the Governor said.

He also stressed that the Monetary Policy Committee will take further monetary actions promptly and appropriately as required to keep inflation expectations firmly anchored and bring down inflation to the target level.

Source: PTI

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Fresh foreign fund inflows in the domestic equity market also added to the optimism.

The 30-share BSE Sensex climbed 174.2 points to 63,317.16 in morning trade after the monetary policy announcement. The NSE Nifty advanced 49.2 points to 18,775.60.

From the Sensex pack, NTPC, Power Grid, Larsen & Toubro, HDFC Bank, IndusInd Bank, HDFC, State Bank of India, ICICI Bank, UltraTech Cement, Tata Steel and Reliance Industries were the major gainers.

Kotak Mahindra Bank, Mahindra & Mahindra, Tata Consultancy Services, Nestle, Axis Bank, HCL Technologies, Wipro, Tech Mahindra and Hindustan Unilever were among the laggards.

The Reserve Bank of India on Thursday opted for a pause second time in a row, maintaining key benchmark policy rate at 6.5 per cent as inflation moderates.

Announcing the bi-monthly monetary policy, RBI Governor Shaktikanta Das said the Monetary Policy Committee (MPC) unanimously decided to keep the rate unchanged at 6.5 per cent.

“RBI staying on a pause and maintaining its stance was in line with expectations,” said Suvodeep Rakshit, Senior Economist, Kotak Institutional Equities.

In Asian markets, Seoul, Tokyo, Shanghai and Hong Kong were trading lower.

The US markets ended mostly lower on Wednesday.

“The MPC maintained unchanged interest rates, as expected. The market had already factored in this policy, maintaining its bullish momentum,” Santosh Meena, Head of Research, Swastika Investmart Ltd said.

Global oil benchmark Brent crude dipped 0.27 per cent to USD 76.74 a barrel.

Foreign Institutional Investors (FIIs) bought equities worth Rs 1,382.57 crore on Wednesday, according to exchange data.

The Sensex had climbed 350.08 points or 0.56 per cent to settle at 63,142.96 on Wednesday. The NSE Nifty advanced 127.40 points or 0.68 per cent to end at 18,726.40.

Source: PTI

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Further, RuPay Debit, Credit, and Prepaid Cards will be enabled for issuance in foreign jurisdictions, which can be used internationally, including in India, Reserve Bank Governor Shaktikanta Das said, while unveiling the second bi-monthly monetary policy of this fiscal.

“These measures will expand the reach and acceptance of RuPay cards globally,” he said, while releasing the Statement on Developmental and Regulatory Policies.

The decision comes in view of RuPay Debit and Credit cards issued by banks in India gaining international acceptance through bilateral arrangements with international partners and co-badging arrangements with international card schemes.

He also said that Bharat Bill Payment System (BBPS) is an ‘anytime anywhere’ bill payments platform which is operational since August 2017.

“Currently, BBPS has onboarded over 20,500 billers and processes over 9.8 crore transactions every month. The scope of BBPS was further expanded in December 2022 to include all categories of payments and collections, both recurring and non-recurring in nature, as well as facilitating in-bound cross-border bill payments,” he said.

To enhance efficiency of the system and also to encourage greater participation, he said, the process flow of transactions and membership criteria for onboarding operating units in BBPS will be streamlined.

With regard to e-RUPI digital vouchers, he said, it is now proposed to expand the scope and reach of e-RUPI vouchers by permitting non-bank prepaid payment instruments (PPI) issuers to issue e-RUPI vouchers; enabling issuance of e-RUPI vouchers on behalf of individuals; and simplifying the process of issuance, redemption, etc.

These measures will make the benefits of eRUPI digital voucher accessible to a wider set of users and further deepen the penetration of digital payments in the country, he said.

The e-RUPI prepaid digital voucher, developed by the National Payments Corporation of India (NPCI), was launched in August 2021 by Prime Minister Narendra Modi as a person-specific and purpose-specific cashless voucher with a cap of Rs 10,000 and single-time redemption facility.

Last year, the RBI increased the cap on the e-RUPI prepaid digital vouchers to Rs 1 lakh from Rs 10,000 and permitted its usage multiple times to facilitate digital delivery of various government schemes to the beneficiaries.

E-RUPI is basically a digital voucher which a beneficiary gets on his phone in the form of an SMS or QR code. It is a pre-paid voucher, which he/she can go and redeem at any centre that accepts it.

This is a one time contactless, cashless voucher-based mode of payment that helps users redeem the voucher without a card, digital payments app, or internet banking access.

Source: PTI

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The MPC met on April 3, 5 and 6 this year and decided to pause on the repo rate at 6.50 per cent after hiking continuously earlier as an inflation control measure.

“The upcoming MPC meeting in early June is expected to focus on two important aspects that have emerged in the last few weeks — a sustained moderation of the headline retail inflation and a better than expected GDP growth print in Q4FY23,” Suman Chowdhury, Chief Economist and Head – Research, Acuite Ratings and Research told IANS.

According to Chowdhury, the consumer price index (CPI) inflation moderated in April-23 to 4.70 per cent year-on-year (YoY), an 18-month low and remained within the RBI’s target range (2-6 per cent) for the second consecutive month.

“The wholesale price index (WPI) inflation moderated to a 34-month low of minus/(-)0.92 per cent YoY in Apr-23, retreating to negative territory after a gap of 33-months,” Chowdhury added.

Core retail and wholesale inflation also moderated to an 11-month low of 5.48 per cent YoY and 41-month low of minus/(-)1.77 per cent YoY in Apr-23 respectively.

Chowdhury said the benign trajectory for both WPI and CPI can be attributed to easing food inflation, lower commodity costs, favourable statistical base effects and lagged impact of past monetary tightening.

“Potential risks such as the El Nino notwithstanding, we expect a continuing moderation in headline CPI inflation in FY24 although core inflation can prove somewhat sticky amidst the strong growth momentum in services, especially contact intensive ones. We maintain our FY24 CPI inflation projection at 5.3 per cent as compared to 6.6 per cent in the previous year,” Chowdhury said.

As regards the GDP numbers, Chowdhury said the provisional estimates for GDP in Q4FY23 and FY23 as a whole, has surpassed the consensus figures in the market.

“As against our estimate of Q4GDP of 5.0 per cent, the actual print has come at 6.1 per cent YoY and significantly higher than the 4.4 per cent YoY in Q3FY23. Overall, the GDP growth for FY23 stands at 7.2 per cent as compared to the 7.0 per cent reported in the advance estimates earlier,” Chowdhury said.

However, the concern remains on the demand side as private consumption has grown by 2.8 per cent YoY only in the fourth quarter, Chowdhury remarked.

For the current year, Acuite Ratings continue to forecast a growth of 6.0 per cent given the expected impact of the global uncertainties and the lagged impact of the interest rate hikes in the domestic economy although RBI has pegged it at a more optimistic 6.5 per cent, Chowdhury said.

“Given such a scenario on the growth-inflation dynamics, we believe RBI MPC will prefer to adopt a “wait and watch” mode before taking any confident action on any rate changes. The “pause” mode is likely to, therefore, continue for another two quarters,” Chowdhury concluded.

On his part, Churchil Bhatt, Executive Vice President & Debt Fund Manager, Kotak Mahindra Life Insurance Company Limited said the market is not anticipating an immediate rate cut.

“The best case for the June policy would be a softer ‘stance’ by the MPC. The current policy stance of ‘withdrawal of accommodation’ has already run its course, with pandemic-era policy accommodation behind us. It’s only a matter of time before the MPC moves to a ‘neutral’ stance,” Bhatt said.

According to Bhatt, in June, MPC is likely to maintain a status quo on rates.

At the April meeting, the MPC also decided to remain focused on withdrawal of accommodation to ensure that inflation progressively aligns with the target, while supporting growth.

Arguing for a pause Ashima Goyal, Emeritus Professor, Indira Gandhi Institute of Development Research, Mumbai said as the inflation forecast for FY24 is 5.2 per cent with Q4 at 5.2 per cent, a repo rate at 6.5 per cent implies the real policy rate is greater than one.

“It has already tightened enough to progressively bring inflation towards the target of 4 per cent, with other complementary policies and barring major new shocks. A further rise in real interest rates is best avoided at present since high real rates can trigger a non-linear switch to a low growth path,” Goyal said.

Goyal and Prof. Jayanth R. Varma, Professor, Indian Institute of Management, Ahmedabad were against hiking repo rate at the recent MPC meetings.

Varma said he does not understand the meaning of the term ‘stance’ – withdrawal of accommodation.

“Turning to the stance, I must confess that I fail to comprehend its meaning. My colleagues in the MPC assure me that the language is crystal clear to market participants and others. It may well be that I am the only person who finds it hard to understand,” Varma said.

“But I am unable to reconcile the language of the stance with the simple fact that no further ‘withdrawal of accommodation’ remains to be done since the repo rate has already been raised to the 6.50 per cent level prevailing at the beginning of the previous easing cycle in February 2019. It is of course possible to undertake further tightening, but that would not constitute a ‘withdrawal of accommodation’ by any stretch of the imagination,” Varma added.

Source: IANS

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