RBI Monetary Policy: Repo rate raised by 25 basis points; FY23 GDP growth estimate raised

RBI Monetary Policy 2023

Reserve Bank of India (RBI) Governor Shaktikanta Das released the Monetary Policy statement, which included the highly anticipated increase in the repo rate of 25 basis points. The central bank had increased the important benchmark interest rate by 35 basis points in its December monetary policy review (bps). In order to keep inflation under control, the Reserve Bank has raised the short-term lending rate by 250 basis points, including the rate in effect today.

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RBI Monetary Policy Q1 FY23: New Rates

Following are the revised rates in the RBI Monetary Policy 2023:

• Repo Rate: 6.50%
• Standing Deposit Facility (SDF): 6.25%
• Marginal Standing Facility (MSF): 6.75%

Important Takeaways from RBI Monetary Policy Q1 FY23:

• Governor Shaktikanta Das Core inflation has not changed. As of January 27, 2023, non-food credit growth was up 16.7% from the prior corresponding period. In order to reduce the CPI, we must never waver.
• As the policy likely defied expectations of a dovish turn, bonds declined, with the yield on benchmark 10-year notes jumping by as far as four basis points to 7.36%, while the currency was trading higher.
• In 12 cities, RBI will roll out a prototype programme for coin-operated machines that use QR codes.
• After the RBI policy announcement, the Sensex was trading almost 300 points higher and the Nifty was up 0.6%.
• Current account deficit will remain eminently controllable and moderate in the second half of 2022–2023: RBI Governor
• In 2022 and thus far this year, the Indian Rupee has remained the least volatile of its Asian counterparts: RBI Governor
• According to the RBI Governor, a rate increase of 25 bps is acceptable at this time, and monetary policy should remain flexible and responsive to inflation.
• According to the RBI, retail inflation will be 6.5% instead of 6.7% in FY23 and 5.3% in FY24.
• Estimated growth of the gross domestic product (GDP) for FY23 was raised to 7% from 6.8%.
• The RBI anticipates 6.4% GDP growth for 2023–2024.
• Rate adjustment for the SDF (Standing Deposit Facility) to 6.25% from 6%.
• Early trading sees the Indian rupee gain 4 paise to 82.66 against the US dollar as traders assess Jerome Powell’s remarks and wait for the Reserve Bank of India to announce its policy.

Union Budget 2023 vs Union Budget 2022

RBI Governor presented the RBI Monetary Policy Q1 FY23

RBI Governor Shaktikanta Das Presenting the RBI Monetary Policy Q1 

RBI Monetary Policy: Increase in UPI facility

• The Unified Payments Interface (UPI) capability, initially available to travellers from G20 nations, is being proposed by RBI to be made available to all inbound travellers for merchant payments.

Union Budget 2023: Railways gets Rs 2.40 lakh crore capital outlay

RBI Monetary Policy: RBI Increased Repo Rate

• Marginal Standing Facility (MSF) rates increased by 25 basis points to 6.75%.
• The RBI increased the repo rate by 25 basis points to 6.50% with immediate effect, marking the sixth consecutive increase.
• The final rate rise in its current tightening cycle is expected by the RBI, after which it will likely take a break for the remainder of the year.

Month of Change of Repo Rate	Repo Rate
March 2020	4.40 %
May 2020	4.00 %
May 2022	4.40 %
June 2022	4.90%
August 2022	5.40%
November 2022	5.90%
December 2022	6.25%
February 2023 (Current Repo Rate)	6.50%

RBI Monetary Policy: Inflation Rate

The retail inflation rate decreased to 5.72% in December, remaining for a second month within the RBI’s comfort zone of 2%-6%. In November it was 5.88%, and in October 2022 it was 6.77%. The picture for the world economy is less bleak than it was a few months ago; growth prospects in key economies have improved while inflation is on the decline, though inflation in major economies still remains considerably above the target.

Here are the inflation rate projections by the RBI Monetary Policy:

• FY23 Inflation Rate Projection: 6.5%
• Inflation FY23: 6.5%
• Inflation Average (Jan-March FY23): 5.6%
• Inflation FY24 Projection: 5.3%
• Real GDP Growth FY24: 6.4%

Also Read: Union Budget 2023: Railways gets Rs 2.40 lakh crore capital outlay