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Repo rate unchanged; RTGS payment will be available 24*7: RBI

Repo rate unchanged; RTGS payment will be available 24*7: RBI

Oct 09, 2020
11:53 am

What's the story

RBI Governor Shaktikanta Das on Friday announced Monetary Policy Committee's decisions and spoke about the revival of the coronavirus-battered Indian economy. The apex bank decided to keep key rates — repo and reverse repo rate — unchanged. The repo rate stands at 4% and the reverse repo rate at 3.35%. Das also declared that the RTGS payment system will be available round the clock.

Payment

Significant change announced in RTGS payment system

In what qualifies as a big push for online banking, Das said Real Time Gross Settlement (RTGS) payment system will be available 24 hours a day, all throughout the year from December 2020. As per the existing rules, the transfer of funds was allowed from 7am-6pm on working days. This option remained unavailable on the second and fourth Saturdays, and all Sundays.

Do you know?

What is the RTGS system?

The RTGS system is normally used for transactions having larger values. The minimum amount that can be sent through this system is Rs. 2,00,000. Notably, there is no upper limit.

Details

India joins club of select countries with this move: Das

Das reminded the NEFT system was made available on a 24x7x365 basis last December, and it has been operating smoothly since. Now, a similar decision for RTGS payments was taken. "India will be among very few countries globally with a 24x7x365 large value real-time payment system. This will facilitate innovations in the large value payments ecosystem and promote ease of doing business," he said.

Statement

Real GDP will decline, but speedy recovery is expected: Das

Further, making perhaps the first post-pandemic projection, RBI said the real GDP is expected to contract by at least 9.5%. Das, however, assured that a speedy rebound is anticipated. He also said the deep contraction in the first quarter of FY 2020-21 is behind India. "GDP growth may break out of contraction and return to positive territory in Q4," he went on.

Recovery

"Agriculture, consumer goods, pharma could see quicker recovery"

Das said there has been a talk about V, U, L, or W-shaped economic recoveries, but India could witness a three-speed recovery with "individual sectors showing varying paces depending on sector-specific realities." He said agriculture, consumer goods, power, and pharma sectors are most likely to see a quicker recovery. The manufacturing firms could see capacity utilization in Q3, he opined.

Decisions

Headline inflation above tolerance level: Das

Meanwhile, the RBI has decided to maintain comfortable liquidity conditions. Das said the size of Open Market Operations (OMO) auctions will be increased to Rs. 20,000cr per auction. "RBI stands ready to take further measures to support liquidity as may be necessary," he assured. He revealed that headline inflation is expected to stay elevated in September. "But will ease from there onward," he added.

Details

Das said RBI is continuing with its accommodative position

The MPC is viewing the current inflation high as "transient," said Das, adding that the top bank intends to "mitigate pressure from higher government borrowing." "We are continuing with the accommodative stance," he stated. RBI has also decided to extend the threshold limit of retail (individual) loan from current Rs. 5 crore to Rs. 7.5 crore.

Mood

Mood of the nation is upbeat: Das

On the economy, Das said the mood of the nation shifted from fear and despair to confidence and hope. Migrants workers are returning to bigger cities, he said, and factories are coming back to life. "Consumer confidence is turning upbeat, business expectations are optimistic," he revealed. While he welcomed the recovery path, he underlined that rise of coronavirus infections poses a risk.