The Reserve Bank of India's Monetary Policy Committee (MPC), at the conclusion of its meeting on August 8, 2024, decided to keep the policy repo rate unchanged at 6.50 per cent for the ninth consecutive time. The MPC maintained its stance of "withdrawal of accommodation," with a 4:2 majority voting in favour of the status quo on the rate. The RBI also announced several developmental and regulatory measures, including a public repository for digital lending apps and a proposed UPI delegated payments feature.
Background
The RBI's MPC has held the repo rate steady since February 2023, when it was last raised by 25 basis points to 6.50 per cent. The cumulative 250 basis point increase since May 2022 was implemented to combat post-pandemic inflationary pressures. The sustained pause reflects the MPC's assessment that while inflation has moderated towards the 4 per cent target, it remains susceptible to food price volatility and requires continued vigilance.
The August 2024 meeting took place against a backdrop of robust domestic economic activity — with GDP growth for FY25 projected at 7.2 per cent — contrasted with global uncertainty stemming from divergent monetary policy paths among major central banks and ongoing geopolitical tensions affecting commodity prices and supply chains.
Key Provisions
The MPC resolution and the Governor's developmental and regulatory policy statement included the following:
Repo rate unchanged: The policy repo rate remains at 6.50 per cent. The standing deposit facility rate stays at 6.25 per cent and the marginal standing facility rate at 6.75 per cent.
Growth and inflation projections: Real GDP growth for FY25 is projected at 7.2 per cent, with quarterly estimates of 7.1 per cent (Q2), 7.3 per cent (Q3), and 7.2 per cent (Q4). CPI inflation is projected at 4.5 per cent for FY25.
Digital lending app repository: The RBI announced a public repository of digital lending applications. All regulated entities and their lending service providers will be required to report the details of their digital lending apps to the repository. This measure is aimed at enabling consumers to verify the legitimacy of lending apps and curb the proliferation of unauthorised digital loan platforms.
UPI delegated payments: The RBI proposed a "Delegated Payments" feature for UPI, allowing a primary account holder to authorise a secondary user to make UPI transactions from the primary account up to a specified limit. This is designed to enhance financial inclusion by enabling family members without bank accounts to participate in digital payments.
Key Facts Statement (KFS) compliance: The deadline for full compliance with the Key Facts Statement framework for retail and MSME loans — requiring lenders to disclose all loan terms in a standardised format — was extended to October 1, 2024.
Implications for Practitioners
The continued rate pause signals that monetary easing is not imminent, and borrowers and financial institutions should plan for the current rate environment to persist into late 2024 or early 2025. Banking and finance practitioners advising on loan structuring should factor in a sustained higher-rate environment when advising clients.
The digital lending app repository is a significant consumer protection measure. Fintech companies operating digital lending platforms must ensure their apps are registered in the repository. Non-compliance could attract regulatory action and reputational consequences. Legal teams at fintech firms and their lending service providers should review existing app registrations and prepare for the compliance framework.
The extended KFS deadline to October 1, 2024 provides additional time for lenders to operationalise standardised disclosures, but practitioners should note that this is a final extension and non-compliance beyond this date may invite supervisory action.