“Unveiling the RBI MPC Meet 2024: Insights on Paytm Action and Future Regulatory Clarity"
The recent clampdown by the Reserve Bank of India (RBI) on Paytm Payments Bank has sparked discussions regarding regulatory compliance in the financial sector. RBI Deputy Governor Swaminathan J highlighted the persistent non-compliance of regulatory norms as the primary reason for the stringent measures taken against Paytm. Assuring ongoing vigilance, he emphasized that suitable steps will be taken as warranted in the future.
RBI Governor Shaktikanta Das underscored the gravity of the violations, stating that the strict action was necessary. Moreover, he provided insights into the economic outlook, forecasting an average inflation rate of 4.5% for the upcoming fiscal year, while noting the economy's commendable performance with a projected growth rate of 7%.Despite early fluctuations, benchmark 10-year bond yields stabilised, and the rupee saw a marginal uptick against the dollar, while stock markets remained relatively unchanged. Inflation, primarily driven by higher food prices, continues to hover above the 4% target. However, the core inflation measure, excluding food and fuel costs, indicates subdued demand-led pressures.
In its latest policy announcement, the RBI kept the repo rate unchanged at 6.5%, marking the sixth consecutive maintenance. The Monetary Policy Committee (MPC) reiterated its focus on withdrawing the accommodative stance. Forecasts for GDP growth in fiscal year 2024-25 were optimistic, with improved consumption demand and private capital expenditure expected to drive growth across quarters.
Regarding inflation, the RBI projected retail inflation at 5.4% for the current fiscal year and 4.5% for 2024-25, attributing uncertainty in food prices to headline inflation. The central bank affirmed its commitment to supporting innovation in the financial sector while addressing concerns arising from the Paytm incident through forthcoming FAQs.
On the economic front, momentum in domestic activities remains robust, with rural demand gathering pace and urban consumption staying resilient. The investment cycle is gaining momentum, supported by sustained government capital expenditure. Looking ahead, the momentum in economic activity is expected to continue into the next fiscal year, encouraged by the government's adherence to fiscal consolidation, as indicated in the Interim Budget.
In addition to regulatory actions, the RBI mandated lenders to provide Key Fact Statements to retail & MSME borrowers and announced plans to introduce offline e-rupee transactions soon. These measures underscore the central bank's commitment to fostering a transparent and innovative financial ecosystem while ensuring compliance with regulatory standards.