Unveiling its first monetary policy review of 2021-22, Reserve Bank of India (RBI) left the repo rate unchanged at 4 per cent, keeping in mind the necessity to sustain growth on a durable basis and continue to mitigate the COVID-19 impact on the economy.

The central bank has the mandate to maintain inflation at 4 per cent, with an upper and lower tolerance band of 2 per cent for the next five years.

RBI Governor Shaktikanta Das said even as the headline inflation at 5 per cent in February 2021 remains within the tolerance band, some underlying constituents are testing the upper tolerance level.

The apex bank has projected the Consumer Price Index (CPI) based retail inflation at 5.2 per cent for the first and second quarters of this fiscal and then decline to 4.4 per cent in the third quarter. For the fourth quarter – January-March 2022 period – the apex bank has estimated retail inflation to be 5.1 per cent.

Going forward, the food inflation trajectory will critically depend on the temporal and spatial progress of the south-west monsoon in its 2021 season, Das said.

Further, he noted that some respite from the incidence of domestic taxes on petroleum products through coordinated action by the Centre and states could provide relief on top of the recent easing of international crude prices.

Also, Das said a combination of high international commodity prices and logistics costs may push up input price pressures across manufacturing and services.

RTGS, NEFT facilities to be opened up for payment system operators

In a major move in the online payments segments, the RBI has decided to allow payment system operators to take direct membership of Centralised Payment Systems (CPS), such as RTGS and NEFT. Membership in Centralised Payment Systems – RTGS and NEFT – for entities other than banks are so far limited to banks, with a few exceptions, such as specialised entities like clearing corporations and select development financial institutions. In its statement on developmental and regulatory policies, the RBI noted that over the last few years, the role of non-bank entities in payment space such prepaid payment instrument issuers, card networks, white label ATM (WLA) operators, Trade Receivables Discounting System platforms, has grown in importance and volume, as they have innovated by leveraging technology.