Forex Moves Up To > US$ 600 Billion

RBI Governor said the Indian Rupee has moved in an orderly manner in the calendar year 2022 and continues to be so in 2023, reflecting the strength of domestic macroeconomic fundamentals.

MUMBAI, Apr 6 (The CONNECT) – RBI Governor Shaktikanta Das today underlined that the fight against inflation is not yet finished.

Delivering the bimonthly monetary policy statement, Das said “Our job is not yet finished and the war against inflation has to continue until we see a durable decline in inflation closer to the target. We stand ready to act appropriately and in time,” Das said.

“We are confident that we are on the right track to bring down inflation to the target rate over the medium term,” he said.

The Governor informed that the Indian Rupee has moved in an orderly manner in the calendar year 2022 and continues to be so in 2023 also. This is reflective of the strength of domestic macroeconomic fundamentals and the resilience of the Indian economy to global spillovers, he noted.

“Our external sector indicators have improved significantly,” said the RBI Governor. Foreign exchange reserves have rebounded from US$ 524.5 billion on October 21, 2022 and now stand in excess of US$ 600 billion taking into account our forward assets.

Das explained that banks in India with IFSC Banking Units (IBUs) were earlier permitted to transact in Indian Rupee (INR) non-deliverable foreign exchange derivative contracts (NDDCs) with non-residents and with other eligible banks having IBUs.

Now, banks with IBUs will be permitted to offer NDDCs involving INR to resident users in the onshore market. The Governor informed that this measure will further deepen the forex market in India and provide enhanced flexibility to residents in meeting their hedging requirements, he said.

Das explained that a secured web based centralised portal named as ‘PRAVAAH’ (Platform for Regulatory Application, Validation And AutHorisation) will be developed, to enable entities to apply for license / authorisation or regulatory approvals from the Reserve Bank. In line with the Union Budget 2023-24 announcement, this will simplify and streamline the current system, wherein these applications are made through both offline and online modes.

The portal will show time limits for deciding on the applications/approvals sought. This measure will bring greater efficiencies into regulatory processes and facilitate ease of doing business for the regulated entities of the Reserve Bank.

The Governor noted that at present, the depositors or beneficiaries of unclaimed bank deposits of 10 years or more have to go through the websites of multiple banks to locate such deposits.

Now, in order to improve and widen the access of depositors / beneficiaries to information on such unclaimed deposits, it has been decided to develop a web portal to enable search across multiple banks for possible unclaimed deposits. This will help depositors/beneficiaries in getting back unclaimed deposits, said the Governor.

Recalling that the Credit Information Companies (CICs) were recently brought under the purview of the Reserve Bank Integrated Ombudsman Scheme (RB-IOS), the Governor announced that the following measures are going to be put in place:

  1. a compensation mechanism for delayed updation /rectification of credit information reports
  2. a provision for SMS/email alerts to customers whenever their credit information reports are accessed
  3. timeframe for inclusion of data received by CICs from Credit Institutions
  4. disclosures on customer complaints received by CICs

 Pre-Sanctioned Credit: The Governor noted that the Unified Payments Interface (UPI) has transformed retail payments in India and recalled how UPI’s robustness has been leveraged to develop new products and features from time to time. The Governor announced that it has now been decided to expand the scope of UPI by permitting operation of pre-sanctioned credit lines at banks through the UPI. This initiative will further encourage innovation, he added.

Das that since early 2020, the world is going through a period of extreme uncertainty; however, in this daunting environment, India’s financial sector remains resilient and stable, he said.

“Overall, the broadening of economic activity; the expected moderation in inflation; the fiscal consolidation with focus on capital spending; the significant narrowing of the current account deficit to more sustainable levels; and the comfortable level of foreign exchange reserves are welcome developments which will further bolster India’s macroeconomic stability. This allows monetary policy to remain unwaveringly focused on inflation,” he explained.

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Expert comments:

Swapnil Jambhale, Co-founder and COO, Safexpay, said the advent and robust penetration of UPI has already created a value chain of ease accelerating the payments ecosystem in the economy. Leveraging this ease and reach to issue pre-sanctioned line of credit to users will help revolutionize the digital banking ecosystem and will aid in cost and time reduction required by customers. 
This is a significant step to offer timely and easy credit to the last mile consumers helping them address their most urgent needs. Additionally, it is a game changer for payments industry to create a safer channel to assist credit payments while also curating different models and features to create exclusive and innovative product offerings to the end users, he said.
The announcement of PRAVAAH, is yet another golden move by the RBI to smoothen the ease of doing business and in sync with the Government’s initiatives of Startup India. The industry is optimistic about the upcoming years to disrupt and take the economy closer to its dream of reaching $5 trillion.”
Anand Kumar Bajaj, Founder, MD & CEO, PayNearby, said The fast pace evolution of technology is playing a huge role in presenting a great opportunity to solve for the broken pieces, fill the gaps and reach inclusion faster. With the RBI sandbox already in place and various regulations evolving alongside, setting up the Platform for Regulatory Application, Validation And AutHorisation (PRAVAAH) is a progressive initiative. With this move, good business and technology opportunities and use cases can be quickly taken up to the regulator for authorisation approval and consented pilot can also be run from this platform. It is a great step in enabling further speedy deployment of technology for innovative use cases after the successful execution of the pilot.
Also, the decision to expand the scope of UPI by permitting pre-sanctioned credit lines at banks through the UPI is a positive move. It will lead to ease of accessing credit services for customers, thereby, accelerating the pace of digital banking adoption in the country while enabling financial inclusion, Bajaj said.

A. Balasubramanian, Managing Director & CEO, Aditya Birla Sun Life AMC Limited, said RBI’s “Policy Pause“ is a prudent policy action taking into account uncertainties on global front and pending pass through impact of past rate hikes. With this, the RBI is addressing evolving growth concerns with equal importance of achieving financial & price stability, hw said.
Arun Poddar, CEO- Choice International, said the RBI Governor’s announcement regarding the projection of inflation and GDP growth for FY24 demonstrates a thoughtful approach towards India’s economic reclamation. The decision to maintain the repo rate unchanged is an optimistic sign for the banking and NBFC sectors. 
The continued focus on financial stability is crucial to maintain the current growth momentum and the war against inflation is still not over. We may witness a market’s rally on the back of this positive RBI policy announcement, as investors take cues from the central bank’s decision and anticipate better economic prospects, he said.
Parry Singh, Founder & CEO, Red Fort Capital, said amidst global pressure and inflation concerns, the RBI has prioritized fostering economic growth and maintaining steady loan demand in India. The decision to not raise interest rates is a positive development for various sectors, particularly non-banking financial companies (NBFCs), as it means the cost of borrowing domestic money will remain stable. This allows NBFCs to continue providing loans and financial products to customers at existing interest rates, providing support to MSMEs and retail borrowers. 
Despite pressure to raise rates, the RBI’s decision reflects a cautious approach to balancing economic growth and inflation control in a rapidly changing global landscape, Singh said.

Ram Shriram, CEO of Mahagram, said that “most of us expected the RBI to increase the repo rate to stimulate economic growth. We are pleased that the repo rate will remain unchained at 6.5 percent”. 
A further commitment by MPCI is to maintain the health of the banking sector, particularly NBFCs, by keeping an eye on vulnerabilities rather than symptoms, aimed at improving liquidity stability to benefit another sector, such as infrastructure, Shriram said. 
It is of utmost importance that the focus be put on the gradual and sustainable withdrawal of accommodation, so as to ensure that the current momentum of growth is sustained for the long run. Hence the MPC’s path is right further. They also promise to address evolving inflationary pressures and maintain their hawkish stance. This move not only ripples the economy but also affects individuals who seek out loans when they need them, Ram added.

Shrihari Gokhale, COO, Lentra said the RBI decition is a cautiously positive one and in line with our earlier prediction. With an eye on keeping inflation in check the RBI has been increasing the REPO rates, however it now wants to take a pause and maintain the current level of investment and liquidity in the market to support growth.  Additionally, the development of a centralised web portal to enable search for unclaimed deposits is a forward step towards depositor protection and awareness, Gokhale said.