Year Ender 2023: RBI remains in the headlines for bringing inflation under control, will keep an eye on reducing repo in the new year.
[ad_1]
Year Ender 2023: Reserve Bank of India (rbi) remained in the news throughout the year for taking steps like controlling inflation, curbing risks related to loans considered unsecured, curbing evergreening by taking new loans and taking measures to improve customer service in banks. . Next year, everyone’s eyes will be on the reduction in the policy rate repo. Also, RBI central bank digital currency (CBDC) can be promoted vigorously. Citing inflationary challenges, RBI has kept the policy rate repo unchanged in five consecutive monetary reviews. Although inflation has come down somewhat, Central bank It clearly said that its target is to bring retail inflation to four percent and there remains a risk regarding food inflation. With the move towards the new year, all eyes are on when RBI will cut the policy rate repo. This is also important because a member of the Monetary Policy Committee (MPC) has expressed the need for such a step after the US central bank Federal Reserve indicated to reduce the rates. Some analysts also say that consumer price index based inflation (CPI) may fall below four percent in mid-2024. After that there is a possibility of a cut in the policy rate.
Got the responsibility of keeping inflation at four percent
The central bank has the responsibility of keeping retail inflation at four percent with a variation of two percent. RBI Governor Shaktikanta Das has talked about bringing inflation to four percent on a long-term and reliable basis. Inflation based on Consumer Price Index fell to a four-month low of 4.87 percent in October. However, it increased to 5.55 percent in November. After announcing the December monetary policy review, Shaktikanta Das said that unless inflation is controlled and it comes down to four percent or below in the long run, there is no point in talking about reducing the policy rate. He had said in December that the future is ‘very unstable’, so any shock can affect the economy. The stance of withdrawing the liberal nature of the policy rate will remain throughout the year. This will be reconsidered only when inflation is reliably within the target range. This year, the skyrocketing prices of tomatoes and onions have justified the Reserve Bank’s warning about challenges on the food inflation front.
RBI also identified risks
The central bank will keep an eye on the performance of the new government to decide on its policy rate and liquidity strategies after the general elections. The RBI Governor has also identified risks in the financial system. And to overcome this, started meetings with the banks’ boards of directors and their management from May 2023. He had said that the central bank’s periodic inspections revealed lapses at the level of corporate governance, smart accounting activities to increase profits and new loans to repay old loans (loan evergreening). By issuing a notification this month, the Central Bank has taken steps to curb the system of taking new loans to repay the old loans through Alternative Investment Fund (AIF). Under this, banks and non-banking financial companies (NBFCs) cannot invest in any scheme of an alternative investment fund which has directly or indirectly invested in the company of the borrower from the financial institution in the last 12 months.
Bank became strict on unsecured loans
The apex bank also took steps to deal with possible risks on the front of loans considered unsecured. Under this, the risk weight for banks and non-banking financial companies (NBFCs) was increased by 25 percent by tightening the rules related to loans like personal loans and credit cards which are considered unsafe. Along with this, there has been talk of curbing the steps taken by big companies to raise cheap loans for their lower rated affiliated units. Apart from this, RBI has emphasized on improving customer service in banks and for this, banks have been asked to take all necessary steps. The central bank ensured that HDFC Bank and HDFC Ltd. The merger should happen smoothly. In the new year, RBI will also focus on promoting central bank digital currency.
[ad_2]
Source link
