RBI: Repo rates unchanged, inflation projection lowered

While keeping the benchmark repurchase or repo rate unchanged at 6 per cent and reverse repo at 5.75 per cent for the fourth time straight, the six member Monetary Policy Committee (MPC) headed by RBI Governor Urjit Patel retained its ‘neutral’ stance. The MPC trimmed its April-September inflation projection to 4.7-5.1 per cent, from its February forecast of 5.1-5.6 per cent. It raised economic growth target to 7.4 per cent for 2018-19 fiscal from 6.6 per cent of last fiscal “with risks evenly balanced”. Five of the six members of MPC voted for the decision, while one sought a hike.  “Overall food inflation should remain under check on the assumption of a normal monsoon and effective supply management by the government,” Reserve Bank of India said in a statement. 

The Apex Bank tightened rules to deter the use of virtual currencies like Bitcoins. It announced a study to explore the introduction of ‘fiat’ digital currencies which can be issued by it. An interdepartmental group has been constituted to study and provide guidance on the “desirability and feasibility” to introduce a “central bank digital currency” and will submit its report by June, the central bank said. “Several central banks are debating the possibility of introducing a fiat digital currency. As opposed to private digital tokens, these are issued by a central bank. They constitute liability of the central bank, and they will be in circulation in addition to the paper currency that we have,” Deputy Governor B P Kanungo told reporters during the customary post-policy address.

“We have decided to ring-fence the RBI regulated entities from the risks of dealing with virtual currencies. These operators are required to stop having a business relationship with the entities dealing with virtual currencies forthwith and unwind the existing relationships within three months,” Kanungo said. He further said that having such a currency will also reduce the cost of printing and circulating paper currency. Kanungo said the blockchain or the distributed ledger technology, which is the backbone of the digital currencies like Bitcoins, has a lot of relevance for the wider economy and we need to embrace those.

All payment system operators in the country will henceforth be required to store data within India to ensure safety and security of users’ information, the RBI said on Thursday. The operators will be given six months’ time to comply with the directive of the central bank. 

In recent times, the payment ecosystem in India has expanded considerably with the emergence of new payment systems, players and platforms. “Ensuring the safety and security of payment systems data by adoption of the best global standards and their continuous monitoring and surveillance is essential to reduce the risks from data breaches while maintaining a healthy pace of growth in digital payments,” the RBI said in a statement on ‘Developmental and Regulatory Policies’. 

The Reserve Bank switched back to the gross domestic product (GDP)-based measure to offer its growth estimates from the gross value added (GVA) methodology, citing global best practices. Government had started analysing growth estimates using GVA methodology from January 2015 and had also changed the base year to 2018 from January. While GVA gives a picture of the state of economic activity from the producers’ side or supply side, the GDP model gives the picture from the consumers’ side or demand perspective. 

Reserve Bank deferred the implementation of the Indian Accounting Standards (Ind AS) by one year as many banks are not prepared to migrate to the new accounting system.

The earlier deadline for banks to switch to the Ind AS was from April 1 2018. “Ind AS was to be implemented from this year. As part of this, we’ve also been requiring banks to submit half-yearly returns based in Ind AS format. But our assessment is that many banks are still not prepared to move to Ind AS. “So, we thought that we should defer this by one year and by when the preparedness and amendments to the schedule to the act are also there,” deputy governor NS Vishwanathan during the customary post-policy presser.