In a landmark decision, the RBI, the central bank of India, announced a rate cut after nearly five years. The RBI Governor, Sanjay Malhotra, made this announcement after conducting his first-ever MPC meeting as the new RBI Governor.
RBI Slashes Interest Rates
The governor slashed the interest rates by 25 basis points, bringing the lending rate down to 6.25 per cent, from its previous 6.50 per cent.
In his address, the governor focused on striking balance between regulation and efficiency and harped on the importance of the role of RBI as a regulator.
Additional Measures
In his speech, Malhotra also focused on some additional measures towards the end of his speech.
Extension of AFA
The first major announcement made by the governor pertained to fighting cyber threats and aiding cybersecurity.
In order to aid security amid rapid digitalisation, the RBI announced the expansion of AFA or an Additional Factor Of Authentication for international online payments, made to foreign merchants.
Bank.in Domain
The next big announcement came when the governor announced a new exclusive Bank.in a domain name will be launched for banks. The registration for the same will begin in April.
This measure, according to the governor will aid security in banking. Furthermore, this will be followed for a Fin.in for the whole financial sector.
The governor also fervently asked banks and NBFCs to work towards a safer fiscal world, with better measures for recent cyber fraud.
Forward Contract For Gov Securities
Another major announcement came in the form or the inititaion of Forward Contract for government securities.
Here, an agreement between two parties to purchase or sell an asset at a specific price and future date is known as a forward contract.
This would allow long-term investors including insurance funds to gauge and manage their risks. This would also allow better and more efficient pricing of derivatives.
Here, the access of the NDS OM will be extended to non-banking investors, allowing them to trade government securities in the secondary market. |
Extension of NDS OM
The governor also announced the expansion of the NDS-OM, an instrument, an electronic system deployed for trading government securities on the secondary market.
Here, the access of the NDS OM will be extended to non-banking investors, allowing them to trade government securities in the secondary market.
Working Group
The final major announcement will result in the formulation of a working group, that will review the trading and settlement timings that is regulated by the RBI.
The group will look into 5 trading market timing. Furthermore, the group will submit its report on April 30.
