Monetary Policy Update – Feb 2024
Important for RBI Grade B & Other banking exams.
In this Video…
• The NEWS
• Highlights – Domestic Economy, Outlook
& Inflation
• Statement on Developmental &
Regulatory Policy
Highlights – Assessments – Domestic Economy
Domestic economic activity is strengthening. As per the first advance estimates (FAE) released by the National Statistical Office (NSO),
real gross domestic product (GDP) is expected to grow by 7.3 per cent, year-on-year (y-o-y) in 2023-24, underpinned by strong
investment activity. On the supply side, gross value added (GVA) expanded by 6.9 per cent in 2023-24, with manufacturing and services
sectors as the key drivers.
Taking all these factors into consideration, real GDP growth for
• 2024-25 is projected at 7.0 per cent with
• Q1 at 7.2 per cent;
• Q2 at 6.8 per cent;
• Q3 at 7.0 per cent; and
• Q4 at 6.9 per cent.
Highlights – Assessments – Domestic Economy
Domestic economic activity is strengthening. As per the first advance estimates (FAE) released by the National Statistical Office (NSO), real gross domestic product (GDP) is expected to grow by 7.3 per
cent, year-on-year (y-o-y) in 2023-24, underpinned by strong investment activity. On the supply side, gross value added (GVA) expanded by 6.9 per cent in 2023-24, with manufacturing and services
sectors as the key drivers.
Taking all these factors into consideration, real GDP growth for
• 2024-25 is projected at 7.0 per cent with
• Q1 at 7.2 per cent;
• Q2 at 6.8 per cent;
• Q3 at 7.0 per cent; and
• Q4 at 6.9 per cent.
CPI inflation is projected at
• 5.4 per cent for 2023-24 with
• Q4 at 5.0 per cent.
• CPI inflation for 2024-25 is projected at 4.5 per cent
with
• Q1 at 5.0 per cent;
• Q2 at 4.0 per cent;
• Q3 at 4.6 per cent; and
• Q4 at 4.7 per cent.
Highlights
Dr. Shashanka Bhide, Dr. Ashima Goyal, Dr. Rajiv Ranjan, Dr. Michael Debabrata Patra and Shri
Shaktikanta Das voted to keep the policy repo rate unchanged at 6.50 per cent. Prof. Jayanth R. Varma
voted to reduce the policy repo rate by 25 basis points.
Dr. Shashanka Bhide, Dr. Ashima Goyal, Dr. Rajiv Ranjan, Dr. Michael Debabrata Patra and Shri
Shaktikanta Das voted to remain focused on withdrawal of accommodation to ensure that inflation
progressively aligns to the target, while supporting growth. Prof. Jayanth R. Varma voted for a change in
stance to neutral.
Statement on Developmental and Regulatory Policies
3. Payment
1. Financial 2.
System and
Market Regulations
Fintech
1. Financial Market
1. Review of the Regulatory Framework for Electronic Trading Platforms
• In October 2018, the Reserve Bank had put in place a regulatory framework for electronic trading platforms (ETPs) for
executing transactions in financial instruments regulated by it. Under the framework, which aimed to ensure fair access
through transparent, safe, and efficient trading processes, robust trading infrastructures and prevent market abuse,
thirteen ETPs operated by five operators have since been authorised. Over the last few years, there has been increased
integration of the onshore forex market with offshore markets, notable developments in the technology landscape and an
increase in product diversity. Market makers have also made requests to access offshore ETPs offering permitted Indian
Rupee (INR) products. In view of these developments, it has been decided to review the regulatory framework for ETPs.
The revised regulatory framework will be issued separately for public feedback.
2. Hedging of Gold Price Risk in the Over the Counter (OTC) Market in the International Financial
Services Centre (IFSC)
• With a view to providing flexibility to resident entities to hedge their exposures to gold price risk efficiently, resident
entities were permitted, in December 2022, to access recognised exchanges in the International Financial Services
Centre (IFSC). It has now been decided to also allow them to hedge the price of gold in the over the counter (OTC)
segment in the IFSC. This will provide resident entities more flexibility and easier access to derivative products in
hedging their exposure to gold prices. The related instructions are being issued separately.
2. Regulations
Key Fact Statement (KFS) for Retail and MSME Loans & Advances
• The Reserve Bank has announced several measures in the recent past to foster greater
transparency and disclosure by the regulated entities (REs) in pricing of loans and other
charges levied on the customers. One such measure is the requirement for lenders to provide
their borrowers a Key Fact Statement (KFS) containing the key information regarding a loan
agreement, including all-in-cost of the loan, in simple and easy to understand format. Currently
KFS is specifically mandated in respect of loans by scheduled commercial banks to individual
borrowers; digital lending by REs; and microfinance loans. Now, it has been decided to mandate
all REs to provide the ‘Key Fact Statement’ (KFS) to the borrowers for all retail and MSME
loans. Providing critical information about the terms of the loan agreement, including all-
inclusive interest cost, shall greatly benefit the borrowers in making an informed decision.
3. Payment System and Fintech
Enhancing the Robustness of AePS
Aadhaar Enabled Payment System (AePS), operated by NPCI, enables customers to perform digital
payment transactions in assisted mode. In 2023, more than 37 crore users undertook AePS transactions,
which points to the important role played by AePS in financial inclusion. To enhance the security of
AePS transactions, it is proposed to streamline the onboarding process, including mandatory due
diligence, for AePS touchpoint operators, to be followed by banks. Additional fraud risk management
requirements will also be considered. Instructions in this regard shall be issued shortly.
3. Payment System and Fintech
Principle-based Framework for Authentication of Digital Payment Transactions
Over the years, the Reserve Bank has prioritised security of digital payments, in particular the
requirement of Additional Factor of Authentication (AFA). Though RBI has not prescribed any particular
AFA, the payments ecosystem has largely adopted SMS-based One Time Password (OTP). With
innovations in technology, alternative authentication mechanisms have emerged in recent years. To
facilitate the use of such mechanisms for digital security, it is proposed to adopt a principle-based
“Framework for authentication of digital payment transactions”. Instructions in this regard will be issued
separately.
3. Payment System and Fintech
Introduction of Programmability and Offline Functionality in Central Bank Digital Currency (CBDC) Pilot
The CBDC Retail (CBDC-R) pilot currently enables Person to Person (P2P) and Person to Merchant (P2M)
transactions using Digital Rupee wallets provided by pilot banks. It is now proposed to enable additional
use cases using programmability and offline functionality. Programmability will permit users like, for
instance, government agencies to ensure that payments are made for defined benefits. Similarly,
corporates will be able to program specified expenditures like business travel for their employees.
Additional features like validity period or geographical areas within which CBDC may be used can also
be programmed. Second, it is proposed to introduce an offline functionality in CBDC-R for enabling
transactions in areas with poor or limited internet connectivity. Multiple offline solutions (proximity and
non-proximity based) across hilly areas, rural and urban locations will be tested for this purpose. These
functionalities will be introduced through the pilots in a gradual manner.
Thank You &
All the Best
