Reserve Bank of India (RBI) Governor Shaktikanta Das on Wednesday, 8 June, announced that the policy repo rate has been increased by 50 basis points to a two-year high of 4.90 percent.
All the six members of the Monetary Policy Committee (MPC) unanimously voted for the latest rate hike, Das said.
The Standing Deposit Facility rate has been hiked to 4.65 percent, while Marginal Standing Facility stands at 5.15 percent.
Das said that the central bank will ensure the availability of adequate liquidity to meet the productive requirements of the economy.
The RBI governor said the Indian economy remained resilient, and the central bank will continue to support growth.
He, however, cautioned that there are risks from the ongoing Russia-Ukraine war.
The MPC, headed by Das had started its deliberations on Monday.
Inflation Fears
Inflation is likely to remain above 6 percent in first three quarters of current fiscal, the RBI governor added. Further, the FY23 CPI inflation was seen at 6.7 percent as opposed to 5.7 percent earlier, Das added.
The MPC voted unanimously to remain focused on withdrawal of accommodation to ensure inflation remains within target going forward, Das said.
The RBI governor said that high global crude oil prices would add to the upside pressure on inflation.
"Our steps will be calibrated, focused on bringing down inflation to target level," the RBI governor said.
The RBI has retained its growth projection at 7.2 percent for the current fiscal on the back of improvement in urban demand and gradual recovery in rural India.
The RBI governor said that the upside risk to inflation persists and the recent spike in tomato prices would fuel food inflation. Also, high global crude oil prices would add to the upside pressure on inflation.
A rise in price across all items, from fuel to vegetables and cooking oil, pushed Wholesale Price Inflation (WPI) to a record high of 15.08 percent in April and retail inflation to a near eight-year high of 7.79 percent.
RBI Doubles Maximum Permissible Loan Limits For Cooperative Banks
The Reserve Bank on Wednesday also doubled the maximum loan amount that a cooperative bank can lend to an individual to up to Rs 1.40 crore in view of the surge in housing prices.
The guidelines governing the maximum permissible loan limits for cooperative lenders were last reviewed over a decade ago.
Das announced that urban cooperative banks will now be allowed to lend up to Rs 1.40 crore as against the previous cap of Rs 70 lakh, while rural cooperative banks can now lend up to Rs 75 lakh as against earlier cap of Rs 30 lakh.
“Taking into account the increase in housing prices since the limits were last revised and considering the customer needs, it has been decided to increase the existing limits on individual housing loans by cooperative banks,” Das said.
Das, who made the announcement along with the other measures in the bi-monthly policy review, added that a detailed circular on the same will be issued separately. The governor said that urban cooperative lenders are classified into tier-I and tier-II, and the maximum loan amount cap will be governed by how a bank is recognised.
Rural cooperative banks include state cooperative banks and district central cooperative banks, and their net worth will determine the maximum permissible loan limits, he said. Those with a net worth of up to Rs 100 crore will now be able to lend up to Rs 50 lakh per individual housing loan as against the previous cap of Rs 20 lakh, while the others can give loans of up to Rs 75 lakh, Das said.
In what can bring cheer to the developers, Das also announced that rural cooperative banks will now be permitted to lend to builders who have launched residential projects, which they are currently prohibited from. Das said the decision has been taken considering the growing need for affordable housing and to realise their potential in providing credit facilities to the housing sector.
He said the overall housing finance limit for rural cooperative banks is unchanged at 5 per cent, and the lenders will have to extend the commercial real estate – residential housing loans within the aggregate limit. Meanwhile, the RBI has also decided to permit urban cooperative banks to allow doorstep banking services to help the elderly and differently-abled segments, Das said.
Credits Cards Allowed to be Linked With UPI
To enable more people to make payments using UPI, RBI has allowed credit cards to be linked with the platform. At present, UPI facilitates transactions by linking savings or current accounts through users' debit cards.
"…it is proposed to allow linking of credit cards to UPI," Das said.
He said that to start with Rupay credit cards issued by the RBI-promoted National Payments Corporation of India (NPCI) will be enabled with this facility, and the facility will be made available after system developments.
Das said the new arrangement is expected to provide more avenues and convenience to the customers in making payments through the UPI platform. UPI has become the most inclusive mode of payment in India, with over 26 crore unique users and 5 crore merchants onboarded on the platform, he added.
In May, Rs 594.63 crore transactions amounting to Rs 10.40 lakh crore were processed through UPI, Das said. The interoperability of prepaid payment instruments (PPIs) has also facilitated access of PPIs to the UPI payment system for undertaking transactions, Das said.
Last Month's Monetary Policy Statement
This is the third monetary policy statement of the current financial year.
Last month, the RBI raised the repo rate or short-term lending rate by 40 basis points in an off-cycle monetary policy review to check spiralling inflation.
The Consumer Price Index (CPI) based inflation, which RBI factors in while arriving at its monetary policy, is on the rise since October 2021.
Retail inflation has remained above the RBI's upper tolerance level of 6 percent since January. It had soared to an eight-year high of 7.79 percent in April.
The government had tasked the central bank to ensure retail inflation remains at 4 percent with a margin of 2 percent on either side.
(With inputs from PTI.)
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