RBI MPC Highlights Today: RuPay Prepaid Forex Cards Allowed, E-RUPI Scope Expanded, BBPS, FEMA Tweak

Announcing the June 2023 monetary policy keeping the repo rate unchanged at 6.50 per cent, RBI Governor Shaktikanta Das on Thursday also announced a slew of measures related to RuPay forex cards, e-RUPI, FEMA rules, priority sector lending, digital lending, stressed assets, and money markets. Here are RBI’s all decisions today in short:

RuPay Prepaid Forex Cards Allowed

The RBI on Thursday allowed banks to issue RuPay prepaid forex cards. The RBI governor said the RuPay debit and credit cards issued by banks in India are gaining increased acceptance abroad.

“This will expand the payment options for Indians travelling abroad. Further, RuPay cards will be enabled for issuance in foreign jurisdictions. These measures will expand the reach and acceptance of RuPay cards globally,” he said.

e-RUPI Vouchers’ Scope To Be Expanded

To expand the scope and reach of purpose-specific e-RUPI vouchers, the RBI has proposed to (i) permit non-bank prepaid payment instruments (PPI) issuers to issue e-RUPI vouchers; (ii) enable issuance of e-RUPI vouchers on behalf of individuals; and (iii) simplify the process of issuance, redemption, etc.

Currently, e-RUPI digital vouchers are issued by banks. “These (latest) measures will make the benefits of eRUPI digital voucher accessible to a wider set of users and further deepen the penetration of digital payments in the country,” Das said.

Licensing Framework Under FEMA Rules To Be Rationalised

The RBI has decided to rationalise and simplify the licensing framework for authorised persons (APs) under the Foreign Exchange Management Act (FEMA), 1999. The RBI decided to review the rules keeping in view the developments, including progressive liberalisation under FEMA, in the last several years and to effectively meet the emerging requirements of the rapidly growing Indian economy.

“This is expected to improve the efficiency in the delivery of foreign exchange facilities to various segments of users including common persons, tourists and businesses,” Das said. The licensing framework for authorised persons (APs) issued under FEMA was last reviewed in March 2006.

Digital Lending: Default Loss Guarantee Arrangement

With a view to further promoting responsible innovation and prudent risk management, the RBI has decided to issue guidelines on default loss guarantee arrangements in digital lending. This will further facilitate orderly development of the digital lending ecosystem and enhance credit penetration in the economy.

The Reserve Bank of India (RBI) had issued the regulatory framework for digital lending in August and September 2022.

Bharat Bill Payment System Processes, Membership Criteria

The RBI has proposed to streamline the process flow of transactions and membership criteria for operating units, to further enhance the efficiency of the BBPS system and to encourage greater participation.

The Bharat Bill Payment System (BBPS) is operational since August 2017. The scope of BBPS was further expanded in December 2022.

Priority Sector Lending Targets for Cooperative Banks

The RBI has decided to extend the timelines for Urban Cooperative Banks (UCBs) for achieving the targets by two more years up to March 2026. Further, UCBs which have met the targets as on March 31, 2023 shall be suitably incentivised.

The RBI governor said, “The Reserve Bank has undertaken several initiatives in recent years to strengthen the UCB sector as well as to deepen financial inclusion. Such initiatives include revision of the priority sector lending targets for UCBs in 2020. While revising the PSL targets, a glide path up to March 2024 was provided for a non-disruptive transition to achieve the revised targets.”

Borrowing in Call and Notice Money Markets by Banks

The RBI has decided that scheduled commercial banks (excluding small finance banks) can set their own limits for borrowing in call and notice money markets within the prescribed prudential limits for inter-bank liabilities.

The measure has been taken with a view to providing greater flexibility for managing their liquidity. The extant regulatory guidelines prescribe prudential limits for outstanding borrowing in Call and Notice Money Markets for scheduled commercial banks (SCBs).

Monetary Policy: Repo Rate Unchanged, FY24 GDP Growth Forecast Remains Same, FY24 Inflation Reduced

The RBI MPC on Thursday unanimously decided to keep the key repo rate unchanged at 6.50 per cent, in line with market expectations. The monetary policy stance is maintained at ‘Withdrawal of Accommodation’ with the MPC voting in favour of this in the ratio of 5:1.

On the inflation forecast, the RBI on Thursday also revised downwards CPI inflation projection for FY24 at 5.1 per cent, against 5.2 per cent earlier.

The real GDP growth for 2023-24 is also projected at 6.5 per cent, which is the same as earlier.