SBI sees no policy rate cut in August MPC meeting
Central Bank of India (SBI), the country’s largest commercial bank, does not expect the Reserve Bank of India (RBI) to engage in any rate cuts in the future. Monetary Policy Committee (MPC) meeting in Augustr, its chairman Dinesh Khara said on Wednesday.
As a bank, we do not expect any rate cut. Khara said at the Financial Inclusion and Fintech Summit that I organized Confederation of Indian Industry (CII) in the national capital.
He was responding to an inquiry on whether the SBI expects the Reserve Bank of India (RBI) to start cutting interest rates at the next MPC meeting scheduled for August 8-10.
Khara pointed out that the rise exceeded expectations in Consumer price inflation (CPI) in June 2023 was 4.81 percent It can only be considered an “aberration”. The higher CPI level of 4.81 per cent was still below the RBI’s upper tolerance limit of 6 per cent.
You may recall that the Reserve Bank of India was at the two previous Monetary Policy Committee meetings in April 2023 and June 2023 Policy rates were kept unchanged at 6.5 per cent. The repurchase price increased by 250 basis points during the fiscal year (FY) 2022-23.
PMJDY is a “game changer”
In his speech at the summit, Khara, who also chairs the B20 Task Force on Financial Inclusion for Economic Empowerment, emphasized that there has been a lot of focus on financial inclusion in the last decade.
Noting that all Prime Minister Jan Dhan Yojana (PMJDY) Khera said 2014 was a ‘game changer’, as it encouraged people to save and these savings ($2 trillion in Rs 49 crore PMJDY accounts) are now being used for the development of the economy.
Ownership of these accounts also ensured seamless transfer of funds to people in times of pandemic, using this infrastructure.
“This innovation has really proven to be a game-changer for an economy like India,” Khara said.
Khara also noted that PMJJBY, PMSBY and APY have now helped create a safety net for large segments of the population. “In the past decade, this type of investment in this field is likely to yield results in the coming days,” he added.
Combining financial inclusion with social protection measures has also resulted in significant fiscal discipline, enhancing financial resilience across a large population in the country.
UPI praise
Khara noted that the Unified Payments Interface (UPI), Account Pool for Digital Credit, ONDC to promote e-commerce and Central Bank Digital Currency (CBDC) are important transformative initiatives taken in the financial sector in the past few years.
He added that the increasing use of UPI has made the payments system a very efficient one in India.
The SBI Chair said that UPI is expected to eventually be the most important settlement mechanism worldwide and will make international remittances cheaper.
The Indian government aims to engage all G20 countries to enable international UPI payments. “This will be a great step and is also likely to lead to the integration of the G20 as a group,” Khara said.
on CBDC
Khara also said that the scope of central bank currencies (the digital rupee) can be broadened by including financial institutions such as mutual funds or insurance services, when they actively participate in government securities settlements (G-sec) or government development loans.
It’s a very valid case. “The CBDC will take part of the actual coin trading, in addition to bringing efficiencies in settlements,” Khara said.
At the same time, Khara explained that a central bank digital currency will not be a substitute for physical currency, and there is scope and case for both physical and digital currency to co-exist, given the size of the country.