The RBI keeps the repo rate unchanged; FinTech experts react

By Puja Sharma

The Reserve Bank of India had Monetary Policy Committee last week. On expected lines, the RBI Governor Shaktikanta Das-led Monetary Policy Committee (MPC) maintained status quo on rates and stance.

The MPC decided unanimously to keep the policy repo rate unchanged at 6.50%. Consequently, the standing deposit facility (SDF) rate remains at 6.25% and the marginal standing facility (MSF) rate and the Bank Rate at 6.75%. The MPC also decided by a majority of 5 out of 6 members to remain focused on withdrawal of accommodation to ensure that inflation progressively aligns to the target, while supporting growth.

“The status quo on policy rates in October is no surprise; the move was supported by all the six MPC members, as expected. After a sharp spike in the first half of the last quarter, prices of agro commodities softened during the latter half of the quarter offering the central bank some breathing space at this juncture.” said Siddhartha Sanyal, Chief Economist and Head of Research, Bandhan Bank.

Such softening in agro prices will likely lead to sub-6% CPI inflation rate in the coming months. This, coupled with negative WPI prints and uneven pace of recovery in various sectors in the economy, will likely prompt the MPC to demonstrate patience and maintain status quo on key policy rates in the coming months.

However, the MPC looks set to stay cautious given rising risks in the global macro backdrop and possibility of further hikes by global central banks (eg., the US Fed) later this year. The RBI’s reiteration of their commitment to the CPI target of 4% further underscores this point as rates look set to stay higher for longer.

Mr. Dilip Modi, Founder, Spice Money on how the extension of PIDF scheme will help in accelerating the payment acceptance infrastructure in rural India said, “In light of the recent monetary policy developments by the RBI, particularly the extension of the Payments Infrastructure Development Fund (PIDF) Scheme and the notable emphasis on advancing emerging payment methods like soundbox devices and Aadhaar Enabled Payment Systems (AePS), are a testament to the government’s recognition of fintechs as transformative agents in the financial landscape of emerging India. According to NPCI data, India witnessed an impressive 29,471 crore value of AePS transactions in July 2023.

Overcoming the barriers of accessibility and availability in financial services is pivotal for promoting inclusion across the length and breadth of the country. Spice Money has been diligently addressing this challenge by extending digital payment and financial services, empowering rural nanopreneurs and Kirana store owners.

Leveraging our vast Adhikari network of 12.7 lakh nanopreneurs, we are dedicated to continuously supporting this mission, aligning with RBI’s efforts to facilitate digital payments nationwide. As we continue to navigate this journey forward, we are excited to harness these initiatives to their fullest potential. They align seamlessly with our vision to bridge the financial divide and empower every Indian, especially those in emerging India, with accessible, secure, and innovative digital financial services.”