BUSINESS-ECONOMY
The Reserve Bank of India, in a fine balancing act between boosting growth and reigning in inflation, came up with several measures on Friday. This comes amid high inflation and a shocking slowdown in the economic growth of the country in the previous quarter. The RBI kept its key repo rate unchanged for the eleventh consecutive time at 6.5 per cent. The central bank, though, cut the Cash Reserve Ratio, or the CRR, which is a percentage of money parked with the RBI that banks lend. This was the first cut to CRR since April 2020 and was made to infuse more liquidity into the system through bank lending. The raised its inflation forecast for this year to 4.8 per cent from 4.5 per cent previously. At the same time, the central bank cut its growth projections 6.6 per cent from the earlier 7.2 per cent. However, despite lowering the growth outlook, RBI governor Shaktikanta Das said the slowdown had already bottomed out in the September quarter. Das said the near-term inflation had turned adverse since October, citing high food price pressures. As such, the RBI maintained its neutral policy stance again. Adhil Shetty, Co-Founder and CEO of Bankbazaar.com, calling RBI's decision a fine job of balancing inflation controls with economic growth, said, "The RBI cutting the CRR by 50 BPS for the first time since April 2020 signals the direction of monetary policy. And while key policy rates are unchanged for the 11th straight time, the stars are aligning for a potential rate cut in February. Shetty added, "We still need to look at the global trends as inflation remains volatile. The RBI has done a fine job of balancing inflation controls with economic growth." In other measures, the RBI increased the deposit ceiling for non-resident Indians to support a record-weak rupee. Despite the Rupee's fall to repeated all-time lows, Das said the currency remains stable compared to the country's emerging market peers against a resurgent Dollar. To further develop the interest rate derivatives market in India and improve the credibility of interest rate benchmarks, the reserve bank proposes to introduce a new benchmark - the Secured Overnight Rupee Rate (SORR). This is based on all secured money market transactions. RBI governor Das also said central banks were put to test amid geopolitical tensions and financial market volatility over the last year. However, he said the health of the financial sector was at its best, with the financial parameters of banks and NBFCS pointing to strength and resilience. Separately, the governor announced that the RBI will set up a committee of experts to suggest a framework for the responsible and ethical use of artificial intelligence. None
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