Hello everyone,    

Welcome to the 103rd edition of The Pattern, a weekly newsletter where we dive into the latest from the world of economy, finance and technology. Let’s get started.  

Of course, I've to start with today’s big news – the RBI’s Monetary Policy Committee just concluded its first meeting of FY 25. To no one’s surprise, the regulator kept the repo rate unchanged for the seventh consecutive time, at a steady 6.5%. 

I say it’s to no one’s surprise because the RBI made it clear that it would not even consider a rate cut until it was absolutely sure that price growth has settled – a scenario that is yet to come to fruition. Inflation still remains above the 4% mark that the central bank is aiming for, and the heat wave that’s gripping the country will only make things worse. 

The soaring temperatures are likely to hit vegetable prices, causing wilting or early ripening of crops which will result in lower production and hike prices. The heat wave could also lower production of animal fodder, eventually raising prices of milk and milk products. 

It’s also likely to put pressure on the agriculture sector, which already contracted 0.8% in the final three months of last year. 

With no repo rate cuts on the horizon till at least October (at best), home loan borrowers can blame the weather gods for their unchanged EMI amounts! 

Let’s now take at some of the non-policy highlights from the MPC meeting: 

• Enabling UPI for cash deposit facility: RBI Governor Shaktikanta Das proposed permitting the use of third-party UPI apps to make payments and cash deposits at Cash Deposit Machines. The regulator also suggested UPI access for Prepaid Payment Instruments (PPIs) through third-party applications. 

   

  The move is expected to improve customer experience and make PPI wallets interoperable to an extent. 

   

  
  

• LCR framework modification: Governor Das announced possible changes to the Liquidity Coverage Ratio framework. Banks are required to maintain LCR in order to face uncertain situations where withdrawals are higher than usual.

   

   

  The governor added that while technology has made it easy for customers to instantly transfer and withdraw money, it poses a challenge to banks in case of sudden, mass withdrawals. Accordingly, a draft circular with suggested modifications will soon be issued, and stakeholders will be asked to comment on the same. 

   

  
  

• Distribution of CBDC through non-banks: In an effort to expand access to digital currencies, the regulator suggested that non-bank payment system operators offer ‘CBDC’ wallets. According to the RBI: 

   

  “Distribution of CBDCs through Non-bank Payment System Operators CBDC pilots in the Retail and Wholesale segments are underway with more use-cases and more participating banks. Continuing with this approach, it is proposed to make CBDC-Retail accessible to a broader segment of users in a sustained manner, by enabling non-bank payment system operators to offer CBDC wallets. “    

  
  

And that’s all from me this week! As always, some interesting data and reading recommendations follow.    Reading list:  

India Central Bank Holds Rate Steady as Economy Stays Strong  

RBI mulls setting up Digital India Trust Agency to check illegal lending apps  

How India spends: UPI reigns supreme, credit cards see 2nd-highest growth  

By financing environmentally damaging projects, can Indian funders be held liable?  

Between the digits  

56%: The growth in UPI transactions as compared to the same time last year  

USD 1 bn: The value of a growth fund being set up by HSBC that will lend to companies scaling up via digital platforms across South Asia 

  5.8%: The percentage of daily working hours India is expected to lose due to rising temperatures by 2030 

USD 1.02 bn: The amount India has paid as incentives to boost local manufacturing  

Thank you for reading. If you liked this edition, forward it to your friends, peers, and colleagues. You can also connect with me on Twitter  here  and follow  FinBox on LinkedIn  to always get all updates. 

Cheers, 

Mayank 

All opinions expressed are my own and do not necessarily reflect the views of FinBox or its promoters.