Mumbai (TIP)- The Reserve Bank of India on Thursday, Feb 8, decided to keep policy rate unchanged for the sixth time in a row as it maintains a tight vigil on inflation. The rate increase cycle was paused in April last year after six consecutive rate hikes aggregating to 250 basis points since May 2022.
Announcing the bi-monthly monetary policy, RBI Governor Shaktikanta Das on Thursday said the Monetary Policy Committee (MPC) has decided to keep the repo rate unchanged at 6.5 per cent. He said MPC will remain watchful of food inflation so that the benefits gained are not frittered away. This is the first bi-monthly policy following presentation of Interim Budget 2024-25 last week.
In December, the Consumer Price-based Inflation (CPI) stood at 5.69 per cent.
The government has mandated RBI to ensure CPI inflation at 4 per cent with a margin of 2 per cent on either side. Changes announced to electronic trading platforms
On the financial markets front, RBI announced that it will comprehensively review the existing regulatory guidelines for Electronic Trading Platforms (ETPs) that enable transactions in financial instruments regulated by RBI such as foreign exchange and government securities. The review comes in the wake of growing integration between Indian rupee (INR) markets onshore in India and offshore centers, rapid evolution in trading technologies and infrastructure, as well as increasing diversity of tradable products.
RBI said that financial market participants have also been demanding access to offshore ETPs that offer INR derivative products for effective price discovery and risk management. As part of the revised norms likely to be unveiled after public feedback, Indian banks and traders may get more flexibility in accessing overseas trading venues.
In another move aimed at easing hedging against gold price fluctuations, the central bank has allowed resident entities in India to access overseas derivative platforms both on recognized exchanges as well as over-the-counter (OTC) markets based in International Financial Services Centre (IFSC). The measure will provide domestic traders and jewelers better ability to hedge their gold exposures through a diverse set of hedging products available globally.
On the regulatory front for banks and lending institutions, RBI has now mandated that all regulated entities must provide a standardized Key Fact Statement (KFS) to retail and MSME borrowers giving key details of the loan agreement including all-in interest cost. This will equip the customers, especially the middle and low-income segments, to make better sense of the loan terms and conditions enabling informed decisions.
Further, the RBI aims to improve safety and security of transactions made under the popular Aadhaar Enabled Payment System (AePS) that allows digital payments to be made against Aadhaar identification. Additional guidelines are expected on strengthening customer onboarding verification process for entities managing AePS touchpoints, as well as incorporating risk management requirements to prevent frauds.
On the digital payments and central bank digital currency (CBDC) front, RBI indicated that it will be adopting a broad principle-based framework for authentication of various types of digital transactions. This is expected to promote adoption of more advanced authentication mechanisms beyond the prevalent SMS-based OTPs.