RBI Increases UPI Limit To ₹5 Lakh, Keeps Repo Rate Unchanged At 6.5%
The Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) meeting is holding today on December 8, 2023. This meeting gives us an insight into the RBI’s plans for managing our economy, especially regarding inflation and growth.
The MPC, led by RBI Governor Shaktikanta Das, decided to keep the repo rate unchanged at 6.5%. This rate is what banks pay when they borrow money from the RBI, and it influences the interest rates in the entire economy. The decision to keep the rate steady was unanimous among the committee members.
The RBI also maintained its stance of ‘withdrawal of accommodation’, which essentially means they are gradually reducing the extra support they were providing to the economy during tough times, like the pandemic.
Governor Das highlighted that our economy is resilient despite the fragile state of the world economy. The RBI has not changed its estimate for the Consumer Price Index (CPI) inflation, which remains at 5.4% for the fiscal year 2023-24.
However, they have increased the projection for our GDP growth to 7%. This means they expect our economy to grow faster than previously thought.
A significant announcement was made regarding Unified Payments Interface (UPI) transactions. The RBI has increased the UPI transaction limit for payments to hospitals and educational institutions to ₹5 lakh. This is a big jump from the previous limit of ₹1 lakh, and it’s expected to make financial transactions easier and more efficient in these sectors.
The Governor also outlined ten observations summarizing the current policy. These include acknowledging the period from 2020 to 2023 as a time of great volatility, the resilience of our GDP growth, progress in managing inflation, and the need for vigilant inflation management.
The future path of inflation is clouded by uncertain food prices, and the RBI will be alert to any risks to the ongoing disinflation process.
Furthermore, the RBI stressed the importance of actively managing liquidity, the robustness of the financial sector, and the modest and comfortably financed current account deficit.
The foreign exchange reserves stand strong at USD 640 billion, providing a buffer against global uncertainties. The stability of the Indian Rupee was also noted as a positive sign of our improving macroeconomic fundamentals.