Highlights of RBI’s 4th Bi-monthly MPC Meeting 2024 : RBI Keeps Repo Rate Unchanged at 6.5%; Retains 7.2% GDP Growth for FY25 

The Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) met from 7th October to 9th October 2024 and released its fourth Bi-Monthly Monetary Policy of Financial Year 2024-25 (FY25) which continues to expect India’s real Gross Domestic Product (GDP) to grow at 7.2% in FY25. The October FY25 meeting was RBI’s 51st MPC meeting.

• RBI has projected the real GDP growth for 2024-25 with Q2 at 7.0%; Q3 at 7.4% and Q4 at 7.4%. The real GDP growth for Q1:2025-26 is projected at 7.3%.
• The repo rate under the Liquidity Adjustment Facility (LAF) was kept unchanged at 6.50% for the 10th consecutive time with a majority vote of 5:1. Nagesh Kumar voted to reduce the policy repo rate by 25 basis points.
• The RBI changes stance of monetary policy to ‘neutral’ from withdrawal of accommodation and to remain unambiguously focused on a durable alignment of inflation with the target, while supporting growth.

The next meeting of the MPC is scheduled for 4th to 6th December 2024.

Note: The government reconstituted the MPC in October 2024 by appointing economists Ram Singh, Saugata Bhattacharya and Nagesh Kumar to the six-member rate-setting panel for four years.

RBI’s Policy Rates:

MPC keeps FY25 inflation forecast unchanged at 4.5%

i.The RBI has maintained 4.5% as Consumer Price Index (CPI) inflation projection for FY25 with Q2 at 4.1%, Q3 at 4.8% and Q4 at 4.2%.

• CPI inflation for Q1:2025-26 is projected at 4.3%.

ii. The RBI has set a target for CPI inflation of 4% within a band of +/- 2%.

iii. Headline inflation declined sharply to 3.6% and 3.7% in July and August respectively from 5.1% in June 2024.

• Food inflation, however, is expected to ease by Q4:2024-25 on better kharif arrivals and a good rabi season.

iv.India’s Current Account Deficit(CAD) widened to 1.1% of GDP inQ1FY25.

RBI increases UPI 123Pay transaction limit to Rs.10,000 and UPI Lite wallet limit to Rs.5,000

The RBI announced significant changes to the Unified Payments Interface (UPI) system during its MPC meeting. The central bank raised the transaction limits for two key UPI services—UPI 123Pay and UPI Lite offering more convenience for millions of users.

i.In order to promote wider adoption of UPI and make it more inclusive, RBI decided to increase the per-transaction limit in UPI123Pay from Rs 5,000 to Rs 10,000.

• UPI 123Pay was created by the RBI and the National Payments Corporation of India (NPCI) and launched in 2022. This facility is now available in 12 languages.
• It is an instant payment system for feature phone users  that facilitates transactions through four technology alternatives – an IVR (Interactive Voice Response) number, app functionality in feature phones, missed call-based approach and also proximity sound-based payments.

ii.The UPI Lite Wallet limit has been increased from Rs 2,000 to Rs 5,000 to simplify small-value digital transactions for users.

• UPI Lite was introduced by the National Payments Corporation of India (NPCI) in 2022 to make small-value transactions easily without a Personal Identification Number (PIN).
• With the wallet limit now increased to Rs 5,000, users can store money directly on their devices.
• UPI Lite eliminates the need to access a bank server for every transaction, providing quick payments for everyday purchases, such as groceries or transport fares.

iii. The RBI also increased the per transaction limit of UPI Lite to Rs.1000 from Rs.500.

RBI to create Climate Risk Information Repository for lenders

i.The RBI has proposed to create a data repository named ‘The Reserve Bank – Climate Risk Information System (RB-CRIS)’ to monitor climate related risks.

ii.The data repository will comprise two parts.

• The first part will be a web-based directory, listing various data sources, like meteorological, geospatial, etc. which will be publicly accessible in the RBI website.
• The second part will be a data portal comprising of datasets (processed data in standardized formats).

iii.It will help the regulated entities to make climate risk assessments for ensuring stability of their balance sheets and that of the financial system.

iv.The available climate related data is comprises various gaps such as fragmented and varied sources, differing formats, frequencies and units.

RBI bars lenders from levying pre-payment fines on loans from MSEs

i.The RBI announced that banks and Non-Banking Financial Companies (NBFCs) cannot levy foreclosure charges or pre-payment penalties on floating rate term loans sanctioned to Micro and Small Enterprises (MSEs).

ii.Earlier, these regulated entities were not permitted to charge pre-payment penalties on floating rate term loans given to individual borrowers, except in case of business purposes.

iii.The updated rule applies to loans extended by all RBI regulated entities inclduing banks and finance companies.

RBI launches name verification for NEFT, RTGS transfer

i.The RBI has proposed a new feature of beneficiary account name look-up facility that would allow Real-Time Gross Settlement (RTGS) and National Electronic Funds Transfer(NEFT ) remitters to verify the recipient’s name before executing the payment.

• UPI and Immediate Payment Service (IMPS) have a similar facility for the remitter of funds to verify the name of the receiver before executive the payment.
• This initiative will reduce incidences of incorrect fund transfers.

ii.NEFT has no minimum limit and maximum limit, while RTGS has a minimum limit of Rs 2 lakh and there is no upper limit for RTGS transactions.

• NEFT is often used for smaller transactions, while RTGS is preferred for larger amounts that need on the time settlement.

RBI Mandates Full CIC Membership for ARCs

i.The RBI makes it necessary for the Asset Reconstruction Companies (ARCs) to become members of all Credit Information Companies(CIC) and submit the required data to them in the prescribed format.

• As per the extant norms, ARCs had to be a member of at least one CIC.

ii.RBI will align the norms for ARCs with the guidelines applicable to banks and NBFCs to track borrowers’ credit history after the transfer of loans by banks and NBFCs to ARCs.

iii.ARCs have been asked to rectify the rejected data received from CICs and upload the same with the CICs within seven days of receiving such data.

iv.ARCs have also been asked to appoint a nodal officer for dealing with CICs.

v.ARCs have been asked to implement this system and processes to ensure compliance with the revised guidelines latest by January 1, 2025.

RBI issues ‘Guidance Note’ for regulated entities

i.The RBI has issued a “Guidance Note” for Regulated Entities/REs (banks, NBFCs, authorised persons, payment system operators, etc) to deal with risks related to Money Laundering (ML) and Terrorist Financing (TF).

ii.The note on Internal Risk Assessment (IRA) of ML and TF is intended for the REs, particularly for the dealing staff and the Anti-Money Laundering (AML) / Countering Financing of Terrorism (CFT) / Counter Proliferation Financing (CPF) practitioners of the REs.

iii.The document also aims to provide support to formulate the internally developed RBA (risk-based assessment) of the respective REs by laying down certain broad principles, methodology, etc

RBI Enhances Digital Payment Accessibility for Disabled

i.The RBI has asked all Payment System Participants (PSPs) to review their payment systems to ensure easier accessibility to persons with disabilities.

ii.The banks and non-bank payment system providers can then make necessary modifications in payment systems and devices like point-of-sale machines, which can be accessed and used by persons with disabilities with ease.

• They have also been asked to refer to the accessibility standards issued by the Ministry of Finance(MoF) in February 2024.

iii.The providers are required to submit the modifications and the time to be taken within a month.

RBI Announces Scholarship Scheme for Faculty Members from Academic Institutions

i.The RBI has announced a scholarship scheme for full-time faculty members teaching economics or finance in University Grants Commission (UGC) and the All India Council of Technical Education (AICTE)recognized institutions in India.

• The scheme is managed by the Department of Economic and Policy Research at the RBI, to enhance research in monetary and financial economics, banking, and related areas.

ii.The initiative aims at making faculty and students aware about the RBI activities while providing exposure to its operations.

iii.A total of five scholarships will be awarded, each lasting three months, beginning from 9th December, 2024.

• Interested candidates must submit a research proposal (up to 1,000 words), a detailed CV, and an official verification letter from their institution by November 5, 2024.

iv.Shortlisted scholars will receive a monthly allowance of Rs.50,000, along with a Rs.2,00,000 honorarium upon project completion.

• Scholars must submit a research report as a contribution to RBI’s research activities and may present their findings at a seminar.
• Additionally, they can publish their work outside RBI with prior approval.

About Reserve Bank of India (RBI)
The Reserve Bank of India (RBI) was established on April 1, 1935 in accordance with the provisions of the Reserve Bank of India Act, 1934. All shares in the capital of the Bank were deemed transferred to the Government of India(GoI) on payment of a suitable compensation.
Governor – Shaktikanta Das
Headquarters – Mumbai, Maharashtra