RBI announces key regulatory policies

The Reserve Bank of India (RBI) on Wednesday announced its bi-monthly monetary policy statement, highlighting a hike in repo rate and reverse repo rate to 6.25 and 6 percent respectively.

Apart from this, several developmental and regulatory policies were announced by the Reserve Bank's six-member Monetary Policy Committee (MPC), catering to micro, small and medium enterprises (MSMEs), Urban Cooperative Banks (UCBs), and so on.

Given below are some key policy changes that were announced post the MPC's three-day meeting:

-The RBI notified that it has permitted voluntary transition of UCBs into small finance banks, provided prescribed criteria is met.

- In view of the continuing rise in yield of government securities, the RBI decided to grant banks the option to spread the mark-to-market (MTM) losses on investments held in Available for Sale (AFS) and Held for Trading (HFT) portfolio for the quarter ending June 30, 2018, equally over a period of four quarters, commencing from the aforementioned date.

-To bring greater convergence of the Priority Sector Lending guidelines for housing loans with the Affordable Housing Scheme, and to give a fillip to the low-cost housing for the economically weaker sections and lower income groups, the RBI has decided to revise the housing loan limits for PSL eligibility from the existing Rs.28 lakh to Rs.35 lakh in metropolitan centres with population of ten lakh and above, and from the existing Rs.20 lakh to Rs.25 lakh in other centres, provided the overall cost of the dwelling unit in the metropolitan centre and at other centres does not exceed Rs.45 lakh and Rs.30 lakh, respectively.

-In a bid to further incentivise adequate maintenance of Consolidated Sinking Fund (CSF) and the Guarantee Redemption Funds (GRF) by state governments and promote an increase in the corpus of these funds, the RBI will lower the rate of interest on SDF from 100 to 200 bps below the Repo Rate.

On a related note, the central bank in its monetary policy statement reiterated its commitment to achieving the medium-term target for headline inflation of 4 percent on a durable basis.

Meanwhile, the RBI predicted GDP growth in the range of 7.5-7.6 percent in the first half of the fiscal, and 7.3-7.4 percent in the second half, with risks evenly balanced.