Highlights of RBI’s 3rd Bi-monthly Monetary Policy of 2022-23; Repo Rate raised to 5.40%

The Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) met on August 3-5, 2022 , and released the RBI’s 3rd bi-monthly monetary policy of FY23 which retained India’s real Gross Domestic Product (GDP) growth at 7.2% for the FY23, with FY23‘s Q1 at 16.2%; Q2 at 6.2%; Q3 at 4.1%; and Q4 at 4%.

The stance is to focus on withdrawal of accommodations.

Real GDP growth for Q1FY24 is projected at 6.7%.

RBI’s Policy Rates:

The MPC raised the repo rate by 50 basis points to 5.40% from 4.90%. Consequently, the Standing Deposit Facility (SDF) Rate adjusted to 5.15% and Marginal Standing Facility (MSF) rate and Bank Rate to 5.65%.

• Policy Repo Rate – 5.40%
• Reverse Repo Rate – 3.35% |
• Standing Deposit Facility (SDF) Rate – 5.15%
• Marainal Standing Facility (MSF) Rate – 5.65%
• Bank Rate – 5.05%
• Cash Reserve Ratio (CRR) – 4.50% |
• Statutory Liquidity Ratio – 18%

Domestic Economy:

• The inflation projection is retained at 6.7% in 2022-23, with Q2 at 7.1%; Q3 at 6.4%; and Q4 at 5.8%, and risks evenly balanced.
• PI inflation for Q1:2023-24 is projected at 5%.
• CPI inflation eased to 7% (year-on-year, y-o-y) during May-June 2022 from 7.8% in April 2022, although it persists above the upper tolerance band.
• Average daily absorption under the LAF (liquidity adjustment facility) at Rs 3.8 lakh crore during June-July 2022.
• Money supply (M3) and bank credit from commercial banks rose (year-on-year) by 7.9% and 14%, respectively, as on July 15, 2022.
• India’s foreign exchange reserves were placed at US$ 573.9 billion as on July 29, 2022.