Monetary Policy Committee (MPC) Meeting of October 2023

Context: The RBI’s Monetary Policy Committee (MPC) has kept the policy rates unchanged at 6.5% in its recent meeting.

Decision of MPC

No change in Policy Rate (Repo Rate)

It is the rate at which RBI lends money to banks to meet their short-term funding needs.

An accommodative stance means the central bank is prepared to expand the money supply to boost economic growth.
Withdrawal of accommodation will mean reducing the money supply in the system which will rein in inflation further.

Incomplete Monetary Policy Transmission: RBI slashed the Repo rate by 250 basis points since May 2022. However, these policy signals are not adequately reflected by corresponding reduction in interest rates by the banks.
Uncertainty Around Inflation: Headline inflation is still above the statutorily mandated rates due to uneven monsoon and its impact on kharif crops, rising consumption demand amid high food inflation and rising crude oil prices.
Surplus Liquidity in the Banking System: Improvement in systemic liquidity due to deposit of Rs. 2000 currency notes.

Extension of Payments Infrastructure Development Fund (PIDF) Scheme:
- PIDF was operationalised with an objective to incentivise the deployment of payment acceptance infrastructure in less developed areas.
- With extending this scheme by two years and expanding the ambit by including beneficiaries of PM Vishwakarma Scheme, the decision will provide fillip to the RBI’s efforts towards promoting digital transactions at the grassroots level.
Introduction of New Channels for Card-on-File Tokenization:
- Tokenization has improved transaction security and transaction approval rate and it can only be created through a merchant’s application or webpage.
- By enabling CoF token creation facilities directly at the issuer bank level, this measure will enhance convenience for cardholders to get tokens created and linked to their existing accounts with various e-commerce applications.