RBI hikes repo rate, permitted inbound travellers to use UPI

The Reserve Bank of India(RBI) has increased the repo rate under the liquidity adjustment facility (LAF) by 25 basis points to 6.50 per cent with immediate effect. Similarly, the standing deposit facility (SDF) rate was adjusted to 6.25 per cent and the marginal standing facility (MSF) rate and the Bank Rate to 6.75 per cent. RBI Governor Shaktikant Das on Wednesday announced the bimonthly policy review after the Monetary Policy Committee meeting which had begun on Monday. While announcing the policy review he said that on the basis of an assessment of the current and evolving macroeconomic situation, the Monetary Policy Committee decided to increase the policy repo rate. Governor said that unprecedented events of the last three years have put to test monetary policy across the world. Emerging market economies are facing sharp tradeoffs between supporting economic activity and controlling inflation while preserving policy credibility.
Shaktikant Das said that global growth is expected to decelerate during 2023. Due to softening of inflation from elevated levels central banks have moderated the size and pace of rate actions but they are reiterating their commitment to bring down inflation close to their targets. The easing of inflation in the last two months was driven by strong deflation in vegetables, which may dissipate with the summer season uptick. The RBI Governor said that real GDP growth is estimated at 7.0 per cent in 2022-23 and for next fiscal it is 6.4 per cent, according to the first advance estimate of the National Statistical Office (NSO). Inflation for 2022-23 is projected at 6.5 per cent, with inflation for the fourth quarter to be estimated at 5.7 per cent, CPI inflation for 2023-24 is projected at 5.3 per cent.
The MPC also decided to remain focused on withdrawal of accommodation to ensure that inflation remains within the target going forward, while supporting growth. Making some important announcements, RBI governor said, to enhance transparency, reasonableness and consumer protection, draft guidelines to be issued, on levy of penal charges and the bank will obtain comments from stakeholders.He said all inbound travellers to India will be permitted to use UPI for their merchant payments (P2M) while they are in the country. To begin with, this facility will be extended to travellers from G-20 countries arriving at select international airports. RBI will launch a pilot project on QR Code based Coin Vending Machine in 12 cities. These vending machines will dispense coins against debit to the customer’s account using UPI instead of physical tendering of banknotes.