RBI monetary policy: Highlights for the financial year 19

RBI monetary policy: Highlights for the financial year 19

Repo rate remains the lowest rate since November, 2010.

The reverse repo rate was also unchanged at 5.75 percent. Five members voted for the interest rate to remain on hold, while one member voted for a hike of 25 basis points.

The RBI circular on analysis means that regulated entities such as banks, payment companies, and processing companies will not provide services to those dealing with Virtual Currencies.

Shilpa Mankar Ahluwalia, partner at law firm Shardul Amarchand Mangaldas, said that it is unclear at this stage whether this requirement will extend to only licensed entities (such as wallet issuers) or also apply to the payment gateways and intermediaries.

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The action comes as monetary authorities around the world have begun to confront the issue of cryptocurrency, which in part was driven by intense demand from India. Now only some payment system operators and their outsourcing partners store their data either partially or completely in India.

Hence, from now on, any bank or wallet or any financial entity under RBI's regulation won't be able to buy or sell virtual currency.

The RBI on Thursday mandated all payment system operators to store data within the country by September.

However, a look at another important document released simultaneously - the Monetary Policy (half yearly) Report (April 2018) points to higher inflation outlook for 2018-19 and 2019-20.

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"With inflation estimated to be in a kind of "no-man's land" (neither too high nor too low), we maintain our call that the RBI will remain on an extended pause", said Suvodeep Rakshit, senior economist at Kotak Institutional Equities. "A circular in this regard is being issued separately", added the note. "Also, the monsoon will slow down site visits post June, and any positive step on part of the RBI this time around would have been welcome", said Dr. Niranjan Hiranandani.

Repo rate is the rate at which the RBI lends money to commercial banks in the country.

The meeting of the six-member monetary policy committee is taking place at a time when the government has stressed that the fiscal deficit and revenue deficit for 2017-18 will be less than the revised estimate of the general budget. The recent fall in inflation and recovering growth are seen supporting the case for a status quo, which should come as a relief for borrowers. "The MPC has prudently voiced concerns about the possible interplay of domestic and global risk factors that could play out over the medium term".

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