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Indian equity markets rebounded on Friday, with the BSE Sensex and NSE Nifty gaining up to 0.10% in late-morning trade despite the Reserve Bank of India's (RBI) decision to keep the repo rate unchanged at 6.5% for the 11th consecutive time. However, the RBI announced a 50-basis-point reduction in the cash reserve ratio (CRR), implemented in two tranches starting December 14, aiming to release ₹1.16 lakh crore into the banking system.
RBI Governor Shaktikanta Das emphasized the move’s role in balancing inflation control with economic growth. Experts like Adhil Shetty of Bankbazaar.com viewed this as a sign of a potential rate cut in February, contingent on global inflation trends.
Additionally, the RBI raised interest rate ceilings for FCNR-B deposits to boost capital inflows. Meanwhile, UPI transactions dipped in November, with volumes and value dropping 7% and 8% respectively, following October's festive-driven peak.
The Reserve Bank of India (RBI) has maintained its key interest rate at 6.5% for the eleventh straight review while lowering the economic growth forecast for FY25 to 6.6% from 7.2%. To address slowing growth, the RBI has reduced the cash reserve ratio (CRR) from 4.5% to 4%, easing monetary conditions. This reduction will occur in two phases of 25 basis points each, effective from December 14 and December 28, according to RBI Governor Shaktikanta Das.
The Monetary Policy Committee (MPC) continues its "neutral" stance, having previously raised the repo rate by 250 basis points between May 2022 and February 2023. Das highlighted the challenges posed by high inflation, adverse weather events, geopolitical uncertainties, and financial market volatility. The central bank has also revised its inflation forecast for FY25 to 4.8%, up from 4.5%, reflecting ongoing risks to economic stability and consumer spending.
The Reserve Bank of India (RBI) has permitted small finance banks (SFBs) to offer pre-sanctioned credit lines through the Unified Payments Interface (UPI), expanding a facility previously available only to scheduled commercial banks. This initiative aims to boost financial inclusion and provide formal credit access, especially for “new-to-credit” individuals and small businesses.
The feature enables users to link pre-sanctioned credit lines with UPI for seamless transactions, supporting overdrafts and retail loans while driving economic growth. As of now, banks like Axis Bank, HDFC Bank, and SBI offer such credit lines on UPI, with monthly credit transactions via UPI averaging ₹10,000 crore, of which ₹100-200 crore is through the credit line feature.
In November, UPI transactions declined by 7% in volume (15.48 billion) and 8% in value (₹21.55 trillion), compared to October’s record-breaking 16.58 billion transactions worth ₹23.5 trillion, spurred by festive sales.
The Reserve Bank of India (RBI) has introduced an advanced AI tool, MuleHunter.AI, to combat digital fraud by identifying mule bank accounts used for laundering illicit funds. Mule accounts are often created by individuals unknowingly recruited or coerced by criminals, making fund tracing and recovery challenging.
RBI Governor Shaktikanta Das announced this initiative during the final bi-monthly monetary policy review of 2024, emphasizing its role in expediting the detection of such accounts and reducing fraud. Developed by the RBI Innovation Hub (RBIH) in Bengaluru, the tool leverages AI and machine learning (ML) to address limitations in traditional rule-based systems, which often produce false positives and delay account detection.
The AI/ML model employs advanced algorithms to analyze transaction patterns and account data, offering faster and more accurate predictions. The RBIH collaborated extensively with banks to refine this technology, aiming to strengthen the financial system's resilience against digital fraud.
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