The Reserve Bank of India during last week of fourth monetary policy review for fiscal year 2022-23 increased the repo rate by 50 bps for the third consecutive time with focus on withdrawal of accommodation to keep inflation within target while supporting growth. RBI governor Shantikanta also stressed that the rupee’s performance was much better than other emerging market economy currencies. With the latest increase, repo rate now stands at 5.4%.
Other highlights of the RBI’s monetary policy meeting:
RBI retained the retail inflation forecast to 6.7% for the current financial year. CPI inflation has been above the medium-term target of 4% for 33 consecutive months. It has also been above the 6% upper bound of the RBI tolerance range for two consecutive quarters.
GDP growth forecast for 2022-23 retained at 7.2%
A mechanism to be implemented to allow NRIs to utilise Bharat Bill Payment system for payments of education and utility on behalf of their families in the country.
Credit info companies will have their own internal ombudsman system and the central bank will set up a panel to examine MIBOR benchmark, alternatives
To increase the breadth of forex reserves in India, RBI proposed to enable Standalone Primary Dealers (SPDs) to offer all foreign exchange market-making facilities as currently permitted to Category-I Authorised Dealers. This measure will provide customers with a wider set of market makers to manage their foreign currency risk.
FDI at 13.6 billion dollars in the first quarter of the current financial year was robust, as compared to 11.6 billion dollars in the first quarter of last year
India’s Foreign exchange reserves of India stays as the fourth largest internationally despite the drawdown of foreign exchange reserves to limit rupee volatility
IRDAI to put limit on expenses of management of life insurers
The insurance regulator has proposed to put limits on expenses of management (EoM) of life insurers, wherein the expenses of the companies should not exceed an amount computed on the basis of percentages in respect of various segments of business written during a financial year.
The regulator has also asked insurers to have a board approved business plan, which should have measures to bring cost effectiveness in the conduct of business and reduction of the expenses of management on an annual basis. This aims to transfer the benefit gained from reduction of expenses from direct business to be transferred to policyholders by way of reduction in the premium.
The regulator has also come out with an exposure draft aiming to provide greater flexibility to insurers as far as their corporate agency tie-ups are concerned. In the draft, they have proposed to increase the maximum limit of tie-ups with insurers for corporate agents from the existing three for each category of insurance to nine for each category of insurance. And insurance marketing firms (IMF) can also have tie-ups with six insurance companies each in the life, health, and general insurance sector. Currently, they can solicit and procure insurance products of two insurers each in the three sectors.
The large non-bank lenders have reported strong credit growth in Q1FY23 despite expectations of dampened demand owing to the surging interest rates and elevated inflationary pressures. The non-bank lenders have attributed the AUM growth to broad-based demand across segments, including retail finance, SME lending, vehicle and mortgage loans.
SEBI grant approval for change in control of HDFC AMC
Capital markets regulator SEBI has granted in-principle approval for change in control of HDFC Asset Management Company along with change in one of the co-sponsors of HDFC Mutual Fund from HDFC Ltd to HDFC Bank. The change in control will happen following the merger of HDFC and HDFC Bank.
Last month, the Reserve Bank of India (RBI) and Pension Fund Regulatory and Development Authority (PFRDA) approved the HDFC-HDFC Bank merger.
