about 2 years ago
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When the entire globe is in a turmoil, its best to wait out the storm and allow things to settle before making major decisions – that’s how RBI’s MPC has viewed its take on interest rate decision.

Hoping that the war troubles will end soon and crude will soon start retracting, while keeping an eye on inflation, which RBI thinks is not a big cause for worry, the MPC unanimously voted to maintain a status quo. The priority is clearly growth and the current spike up in prices is not seen as a major cause for concern, more like a transitory bump to get over. The Governor also hopes that with IMD predicting a normal monsoon, rabi output will be robust and this will mean that rural demand will seen an uptick. Growing consumer and business confidence, as per the Governor, will support revival of economic activity.

This is more of a cautious but proactive approach. The RBI did acknowledge that external developments of last 2 months have materialised downside risks to domestic growth and upside risks to inflation projections. Keeping this in mind, Real GDP growth for FY23 has been lowered to 7.2%, down from 7.8% projected in Feb; while it see’s 16.2% (17.2%) real GDP growth in Q1FY23, 6.2% (7%) in Q2, 4.1% (4.3%) in Q3, Q4 at 4% (4.5%). This GDP growth has been based, assuming crude oil at $100/barrel in FY23.

On the inflation (CPI) front, it has raised the projection for FY23 at 5.7% v/s 4.5% projected in Feb. Of this 5.7%, it expects CPI to be at 6.3% (4.9%) in Q1, 5% (same) in Q2, 5.4% (4%) in Q3 and 5.1% (4.2% in Q4. The Governor said, “Geopolitical tensions have upended previous inflation narrative, clouded inflation outlook for FY23.”

RBI has done the right thing – it has given revival of growth a priority while assuring the markets that rising CPI can be tackled with non-monetary measures.  A rate hike at this juncture would have adversely impacted growth as an already weak private investment demand will further be contracted. For now, this is good but hope the war ends and we can all get back to life and growth.


  • Maintains status quo on the interest rate front
  • Repo stays at 4% and that of reverse repo rate at 3.35%
  • Fixed rate reverse repo replaced by SDF
  • VRRR reverse repo put in place
  • Introduced the Standing deposit facility (SDF) rate at 25 bps below repo rate to absorb liquidity – lower end of LAF corridor
  • Marginal standing facility (MSF) rate at 25 bps above repo rate to inject liquidity – upper end of LAF corridor
  • MSF and SDF will be available from 5:30 pm to 11:59 pm on all days of the week, through the year
  • Access to MSF and SDF to be at the discretion of the banks
  • Held-to-maturity limit (HTM) on SLR enhanced from 22% to 23% of NDTL till Mar 31, 2023; to be restored to 19.5% in a phased manner starting from quarter-ending June 2023.
  • Rationalisation of risk weights for individual housing loans to be extended till March 31, 2023
  • GDP forecast gets an aggressive cut
  • CPI estimates hiked but not as high as expected
  • System of cardless cash withdrawal will be made available across all banks and ATM networks using UPI

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