RBI Governor Shaktikanta Das on Wednesday raised the repo rate by 35 basis points to 6.25 per cent while maintaining the stance at ‘withdrawal of accommodation’. He also announced a slew of other measures including extending held-to-maturity limit for banks, introducing single-block-and-multiple-debits functionality in the UPI, allowing resident entities to hedge their gold price risk on recognised exchanges in the IFSC.
Enhancing the Mandates of Unified Payments Interface (UPI)
The RBI on Wednesday said the single-block-and-multiple-debits functionality will be introduced in the UPI. It will enable a customer to block funds in his/her account for specific purposes, which can be debited whenever needed. Currently, the UPI has a functionality to process payment mandates for recurring as well as single-block-and-single-debit transactions.
“This will significantly enhance the ease of making payments for investments in securities including through the Retail Direct platform as well as e-commerce transactions," the RBI governor said.
Jyoti Prakash Gadia, managing director at Resurgent India, said, “The announcement made by RBI about the UPI platform (Unified payments interface) will further expand its scope by facilitating multiple payments by blocking the account, as against single payments at present. This will enable a more efficient and user-friendly mechanism to further popularise this payments platform."
Hedging of Gold in the International Financial Services Centre (IFSC)
Das said the central bank has now decided to allow the resident entities to hedge their gold price risk on recognised exchanges in the IFSC. Currently, resident entities in India are not permitted to hedge their exposure to gold price risk in overseas markets.
With a view to providing greater flexibility to these entities to hedge the price risk of their gold exposures, resident entities will now be permitted to hedge their gold price risk on recognised exchanges in the IFSC. This measure will benefit importers/exporters of gold such as jewellers and industries which use gold as an intermediate or raw material," Shaktikanta Das said.
Expanding the Scope of Bharat Bill Payment System (BBPS)
The RBI governor said the scope of the Bharat Bill Payment System is being enhanced to include all categories of payments and collections, both recurring and non-recurring, and for all category of billers (businesses and individuals). Currently, it handles recurring bill payments for merchants and utilities and does not cater to nonrecurring bills.
Launched in 2017, BBPS currently also does not cater to bill payments or collections such as payment of fees for professional services, education fees, tax payments, rent collections, etc, for individuals even if those are recurring in nature.
“This will make the BBPS platform accessible to a wider set of individuals and businesses who can benefit from the transparent payments experience, faster access to funds and improved efficiency," Shaktikanta Das said.
SLR Holdings in Held to Maturity (HTM) Category
The RBI on Wednesday allowed more time for the HTM (held-to-maturity) categorisation of fresh bank investments in bonds till March 2024. The banks will be able to have an enhanced HTM (held-to-maturity) limit of 23 per cent up to March 31, 2024. This will provide further flexibility to banks in managing their investment portfolios. Held-to-maturity (HTM) means the category of investment portfolio maintained by the banks with intention to hold securities upto maturity.
“Banks will now be allowed to include securities acquired between September 1, 2020 and March 31, 2024 in the enhanced HTM limit. The HTM limits would be restored from 23 per cent to 19.5 per cent in a phased manner starting from the quarter ending June 30, 2024," the RBI said.
Jyoti Prakash Gadia, managing director at Resurgent India, said, “The extension of time for HTM categorisation of fresh bank investments in bonds till March 2024 paves the way for stability in the bond market/ financial sector and future government borrowing.
Policy Review Decisions
— In the consecutive fifth hike this year, the RBI’s Monetary Policy Committee on Wednesday raised the repo rate by 35 basis points (bps) to 6.25 per cent with immediate effect, making loans expensive. The policy rate is now at the highest level since August 2018. The RBI has maintained policy stance at ‘withdrawal of accommodation’.
— The RBI has retained its inflation forecast for the current financial year 2022-23 at 6.7 per cent. The RBI expects to bring CPI inflation down to 5 per cent and 5.4 per cent in Q1FY24 and Q2FY24, respectively.
— The central bank has lowered FY23 GDP growth forecast to 6.8 per cent from 7 per cent earlier.
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