08-Jun-2023
2 mins read
In today’s Monetary Policy Committee (MPC) meeting, the Reserve Bank of India (RBI) took key decisions that will shape India’s economic condition. The meeting was led by RBI Governor Shaktikanta Das. The committee met for three constructive days before making critical decisions that impacted everything economically.
Status Quo on Key Repo Rate
The headline news coming out of the meeting was that the RBI decided to keep the key policy repo rate unchanged at 6.5 per cent. This decision, which came after extensive deliberation, aligns with the CNBC-TV18 poll of economists forecast, considering inflation is within the comfort zone of the central bank. The committee voted unanimously for the repo rate decision.
Central Bank Digital Currency Aims for One Million Users
In an interesting development, Deputy Governor T Rabi Shankar revealed the RBI’s ambition to secure one million customers for its central bank digital currency (CBDC) by the end of June. The CBDC trials for both the wholesale and retail segments started in November and December 2022, respectively. No specific public launch date for the CBDC has been mentioned yet.
Anticipated Changes in Home Loan Interest Rates
With the status quo on the repo rate and inflation levels dipping, experts predict a decrease in home loan interest rates by the end of 2023. However, the RBI has kept its stance intact as inflation still hovers above the tolerance level.
Return of Rs 2,000 Banknotes to Banks
A significant share of Rs 2,000 banknotes has made its way back to the banks, as announced by Governor Shaktikanta Das. Roughly 50 per cent of these notes in circulation before the announcement have returned, and approximately 85 per cent of them came back as deposits to banks.
Expanding the Reach of RuPay Cards and e-Rupee Vouchers
The RBI has permitted banks to issue RuPay prepaid forex cards, which it expects will increase the global reach of RuPay cards. The central bank also mentioned that it is working on enabling the issuance of e-rupee vouchers on behalf of individuals; this move is also taken with the expectation of increasing the presence of digital payments in the country.
Economic Outlook and Inflation
RBI mentioned that it expects India’s GDP growth to remain at 6.5 per cent, though the central bank has expressed its will to be vigilant about inflation, that still goes above the target of four per cent. With the target, while also supporting growth, the RBI will continue to focus on aligning inflation.
In conclusion, the decisions made in the MPC meeting are expected to impact the Indian economy on multiple fronts. From digital currencies to interest rates and inflation, the RBI’s decisions indicate a focus on stability, growth, and the expansion of digital payment options.