RBI Keeps Repo Rate Steady; Focuses on Tackling Food Inflation

The Monetary Policy Committee (MPC) of the Reserve Bank of India decided to maintain the repo rate at 6.5% for the ninth consecutive meeting at its third bi-monthly policy review of the fiscal year. This judgment, which was announced by Governor Shaktikanta Das, was made by a 4:2 majority. The MPC will also not change its position regarding the termination of accommodations.

Highlights from Shaktikanta Das's Speech at the RBI MPC Meeting:

• Monetary Policy Stance: RBI continues with the withdrawal of accommodative monetary policy.
• Growth Projection: Growth projection remains unchanged at 7.2% for the current financial year.
• Inflation Estimates: CPI inflation estimate for FY25 is maintained at 4.5%, assuming a normal monsoon.
• Food Inflation: The MPC emphasizes vigilance on food inflation due to potential spillover effects, despite a significant fall in core inflation.
• Retail Inflation: Projected at 4.5% for FY25.
• Inflation Trajectory: Overall inflation is moderating, with expectations of continued moderation but the need for caution.
• Current Account Deficit: Expected to stay within sustainable levels for April-June, with a 20% increase in gross FDI flows in FY25.
• UPI Tax Payment: UPI tax payment limit increased to ₹5 lakh from ₹1 lakh.
• Cheque Clearance: RBI proposes steps to reduce cheque clearance time to a few hours.
• Forex Reserves: India’s forex reserves reach a record high of USD 675 billion as of August 2.
• Financial System: The Indian financial system remains resilient, supported by broader macroeconomic stability.
• Balance in Inflation and Growth: Inflation and growth are evolving in a balanced manner, though vigilance on food prices is necessary.

RBI Proposes Faster Cheque Clearance

During the bi-monthly policy meeting, RBI Governor Shaktikanta Das revealed that the Monetary Policy Committee (MPC) has proposed new measures to expedite chequeclearance, aiming to reduce the process to just a few hours. This initiative is intended to enhance the efficiency of banking operations and provide faster service to customers.

Continuous Clearance During Business Hours

Governor Das announced that cheques will now be scanned, presented, and cleared within a few hours during business hours. The clearing cycle will be shortened from the current T+1 days to a few hours. Detailed guidelines on this change will be issued soon.

Enhancing Efficiency and Customer Experience

The proposed changes are designed to boost cheque clearing efficiency and minimize settlement risk for participants. Governor Das emphasized that the primary goal is to enhance the overall customer experience. The plan involves transitioning the Cheque Truncation System (CTS) from batch processing to continuous clearing with 'on-realisation-settlement'.

Enhancing Cheque Clearing Efficiency

The RBI's new measures aim to improve the efficiency of cheque clearing and reduce settlement risk for participants. Governor Shaktikanta Das outlined the transition from batch processing to continuous clearing with 'on-realisation-settlement,' designed to enhance the overall customer experience.

Increased UPI Tax Payment Limit

In a related move, the RBI has raised the limit for tax payments through UPI from ₹1 lakh to ₹5 lakh per transaction. This adjustment reflects the growing adoption and potential of UPI, which currently boasts a user base of 424 million individuals, signaling opportunities for further expansion.

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