Issue: 1136
RESOLUTION OF THE MONETARY POLICY COMMITTEE FEBRUARY 4 TO 6,
2026:
The
Monetary Policy Committee (MPC) held its 59th meeting from February 4 to 6,
2026 and the outcomes of the same are outlined hereunder;
·
The policy repo rate kept unchanged at 5.25 per cent,
and consequently the SDF rate remains at 5.00 per cent and the MSF rate and the
Bank Rate remains at 5.50 per cent.
·
The MPC also decided to
continue with the neutral stance.
·
Real GDP, as per the First Advance Estimates (FAE), is estimated to grow
at 7.4 per cent YoY in 2025-26.
·
On the supply side, real GVA
growth of 7.3 per cent is driven by buoyant services sector, resilient
agricultural sector and revival in manufacturing activity.
·
Real GDP growth projections
for Q1:2026-27 and Q2 are revised upwards to 6.9 per cent and 7.0 per cent,
respectively.
·
CPI inflation for 2025-26 is
now projected at 2.1 per cent with
Q4 at 3.2 per cent. CPI inflation for Q1:2026-27 and Q2 are projected at 4.0
per cent and 4.2 per cent, respectively.
(RBI Press Release)
STATEMENT ON DEVELOPMENTAL AND REGULATORY POLICIES DATED
FEBRUARY 6, 2026:
The highlights
of the Statement of Developmental and Regulatory policies announced are as
under;
·
Advertising,
Marketing and Sales of Financial Products and Services by Regulated Entities
(REs):
Mis-selling financial products and services by any RE has significant
consequences for both customers as well as the RE. It has therefore been
decided to issue comprehensive instructions to REs on advertising, marketing
and sales of financial products and services.
·
Conduct of Regulated Entities
in Recovery of Loans and Engagement of Recovery Agents related instructions to
be harmonized across different REs.
· Review
of framework of Limiting Customer Liability in digital transactions: The extant
instructions on limiting the liability of customers in unauthorised electronic
banking transactions were issued in 2017. In view of the rapid adoption of
technology in the banking sector and payments systems, since issuance of these
instructions, the existing instructions to be reviewed.
· Bank Lending to Real Estate
Investment Trusts (REITs): While bank lending to InvITs
was allowed, lending to REITs was not permitted. Considering the presence of
strong regulatory and governance framework for listed REITs, it is proposed to
permit commercial banks to extend finance to REITs, subject to appropriate
prudential safeguards.
· Review
of Lending norms for UCBs proposed.
·
Exemption from registration to eligible NBFCs
not availing public funds and not having customer interface (including ‘Type I
NBFCs’):
The Scale-Based Regulatory Framework for NBFCs envisages differential
regulatory treatment for NBFCs that do not avail public funds and do not have
any customer interface. Considering their significantly lower systemic-risk
profile, it is proposed that such Type-I NBFCs with asset size not exceeding
?1,000 crore, may be exempted from registration requirement with the Reserve
Bank subject to certain specified conditions.
·
Amendment
of NBFC Branch Authorisation Directions-2025: At per extant regulatory
requirement, NBFC - Investment and Credit Companies (ICCs) engaged in the
business of lending against gold collateral with over 1,000 branches are
required to obtain prior RBI approval for opening new branches. It is proposed
to dispense with the requirement of prior approval for opening branches by such
NBFCs.
·
It is proposed to issue, Discussion
Paper on “Exploring safeguards in digital payments to curb frauds”.
·
Revision
in Lead Bank Scheme: It is now proposed to issue a comprehensive
set of instructions on the Scheme with a view to streamline the operational
aspects. In addition, the Reserve Bank will be launching a unified portal for
reporting of Bank-wise LBS data which is currently fragmented across various
portals.
· Revision in the Guidelines of
Kisan Credit Card (KCC): The proposed guidelines include, among others,
standardisation of crop season, extension of KCC tenure to six years, alignment of drawing limit with Scale of Finance (SoF)
for each crop season and inclusion of expenses on technological interventions.
· Review
of guidelines relating to use of Business Correspondents (BCs) by banks is
proposed.
·
Enhancement
in Collateral free loan limit for MSEs from ?10 lakh to ?20 lakh: It has been decided to
enhance the limit of collateral free loans to MSEs from ?10 lakh to ?20 lakh.
The above provisions shall be applicable to all loans to MSE borrowers
sanctioned or renewed on or after April 01, 2026.
·
Development
of corporate bond market: A regulatory framework to
enable the introduction of derivatives on credit indices and total return swaps
on corporate bonds will be issued shortly for public feedback.
·
Review
of the Voluntary Retention Route for FPI investment in debt instruments: The Voluntary Retention Route
(VRR) was introduced by the Reserve Bank in March 2019 to provide an additional
channel for investments by Foreign Portfolio Investors (FPIs) with long-term
investment interest in the Indian debt markets. The VRR has been witnessing
active investment by FPIs, and over 80 per cent of the current investment limit
of ?2.5 lakh crore has been utilised. With a view to ensuring predictability
about the availability of investment limits under the VRR and to further
increase ease of doing business, it has been decided that (a) investments under
the VRR shall now be reckoned under the limit for FPI investments under the
General Route; and (b) certain additional operational flexibilities will be
provided to FPIs investing under the VRR.
· Mission Saksham – Capacity
Building for the UCB Sector: To strengthen capacity
building in Primary (Urban) Co-operative Banks (UCBs), the Reserve Bank will
soon be launching Mission SAKSHAM (Sahakari Bank Kshamta Nirman)- a sector-wide
capacity-building and certification framework. The capacity building of the
sector would be implemented through a large number of physical training
programmes as well as a scalable learning platform, to cover about 1.40 lakh
participants, across all functions.
(RBI Press Release)
India agrees to zero duties, no Russian oil, $500bn energy buys
for 18% reciprocal tariffs: The US and India have
announced that they have reached a framework for an interim trade agreement, a
move both sides say reflects their shared push for fair and mutually beneficial
trade. In a joint statement, the two countries said they were “pleased to
announce” the framework, adding that it reaffirms their commitment to a broader
US-India Bilateral Trade Agreement, or BTA. The BTA talks were launched by US
President Donald Trump and Indian Prime Minister Narendra Modi on February 13,
2025.
(Business Line)
RBI back in the crease: After a flurry of rate cuts, MPC signals
a prolonged pause: After delivering an aggressive 125 basis points of
rate cuts in 2025, the Reserve Bank of India appears to have shifted into a
steadier phase, with policy focus moving from rapid easing to improving credit
transmission, easing regulatory frictions for lenders and strengthening
consumer protection. Against this backdrop, the Monetary Policy Committee’s
unanimous decision to hold interest rates came as little surpriseThe MPC
retained its “neutral” stance, signalling that rates are likely to remain at
current levels for the next nine to twelve months..
(Financial Express)
Financial bids received for IDBI Bank privatisation; will be
evaluated: DIPAM secy: Financial bids for the strategic
disinvestment of IDBI Bank have been received and will be evaluated, the
Department of Investment and Public Asset Management (DIPAM) said on February
6, marking a key step forward in the government’s long-pending plan to
privatise the lender. “Financial bids have been received for
the strategic disinvestment of IDBI Bank. They will be evaluated as per the
prescribed procedure,” the DIPAM secretary said in a social media post on
February 6. The receipt of final financial offers from shortlisted bidders
moves the transaction into its decisive evaluation phase.
(Moneycontrol)
Financially sound banks to pay 33% lower insurance premium: Come April 1, 2026,
financially sound banks will see a sharp 33% decline in their deposit insurance
premium, bringing it down to 8 paise per Rs 100 of deposits, compared with the
current premium of 12 paise per Rs 100. Going ahead, banks in India will shift
from the existing flat-rate system to a risk-based premium model. DICGC is
planning a differentiated premium structure that rewards financially strong
banks with lower insurance costs. Banks will be classified into four
categories—A, B, C, and D—based on their risk profile and supervisory ratings.
Category A banks, which demonstrate strong risk management and robust financial
health, will see premiums reduced to 8 paise per Rs 100 of deposits, while
weaker Category D banks may continue to pay up to the existing ceiling of 12
paise. Category B and C banks will pay 10 paise and 11 paise, respectively.
(Financial Express)
PFC, REC boards give in-principle nod to merger: The boards of Power Finance
Corporation and REC have given their in-principle approval for a merger. This
move follows an announcement in the budget to restructure these public sector
NBFCs. The merger aims to create a larger, more efficient lending institution.
This will help finance India's growing power sector needs. Detailed proposals
will be made after obtaining necessary approvals.
(Economic Times)
Small digital fraud victims to get up to ?25K refund: In a first-of-its-kind move,
bank customers who fall victim to small-value digital frauds will be eligible
for compensation of up to ?25,000 for the first such incident, the RBI
announced on Friday. The proposed compensation will be a one-time relief and
will cover up to 85 per cent of the amount lost, or ?25,000, whichever is
lower, said RBI Governor Sanjay Malhotra during a media interaction following
the monetary policy announcement. “…as long as (customers) are defrauded,
whether on their own accord or someone else’s, no questions asked, we will compensate
them as long as it is unintended,” he said.
(Business Standard)
Kotak Mahindra Bank issues India's first fully digital FPI
licence: Kotak
Mahindra Bank has become the first custodian in India to issue a foreign
portfolio investor (FPI) licence and complete the entire account-opening
process using electronic signatures, marking a key step in fully digital
onboarding for overseas investors. The bank has already issued two FPI licences
based entirely on digitally signed documents, it said in a release. The move
follows Securities and Exchange Board of India operationalising a unified
digital workflow in January 2026.
(Business Standard)
New policies in works for faster decision-making: Gadkari on
Invit push:
As the
government looks beyond the toll-operate-transfer (TOT) model and towards
infrastructure investment trusts (Invits) for asset monetisation, new policies
are being framed to enable faster and more transparent decision-making, says
Union Road Transport and Highways Minister Nitin Gadkari. Edited excerpts of
his interview with Prachi Pisal in Nagpur on the sidelines of the Advantage
Vidarbha 2026 summit. Infrastructure is key to economic growth. The first
priority, therefore, is to step up spending and build more roads, expressways
and tunnels to strengthen the country’s infrastructure. There is also
significant potential to do so. With automobile usage rising, the need for more
roads is growing, and the projects are economically viable.
(Business Standard)
Karnataka PSU borrowing model a template for states: World Bank: The Karnataka government’s decision in 2014 to
include the borrowing of state public-sector undertakings (PSUs) and
special-purpose vehicles in its own liabilities can offer a template for
replication by other states, a World Bank report for the 16th Finance
Commission has said. This is for improving fiscal reporting and strengthening
budgetary control. The state had amended the Karnataka Fiscal Responsibility
Legislation Act in February 2014 to broaden the definition of liabilities. State
governments in India continue to depend heavily on off-Budget borrowing (OBB)
to fund subsidies, infrastructure, and loss-making public utilities, masking
the extent of their fiscal stress and creating sizable hidden liabilities, the
World Bank has found.
(Business Standard)
RBI removes investment cap under voluntary retention route for
FPIs: The
Reserve Bank of India (RBI) on Friday announced the removal of the ?2.5
trillion investment cap under the voluntary retention route (VRR) for foreign
portfolio investors (FPIs), a move aimed to deepen domestic bond markets and improve
capital flow stability. Under the revised framework, investments made through
VRR will be governed only by the existing investment ceilings applicable to
each category of securities under the general route, effectively giving foreign
investors greater flexibility in deploying long-term funds into Indian debt
markets.
(Business Standard)
RBI issues draft norms on total return swaps: RBI on Friday issued draft
guidelines on derivatives trading for corporate bond indices and total return
swaps (TRS). Finance Minister Nirmala Sitharaman announced these measures in
the Budget to deepen the corporate bond market. “An active derivatives market
can facilitate efficient management of credit risks, improve liquidity and
efficiency in the corporate bond market and facilitate issuance of corporate
bonds across the rating spectrum,” the RBI said in the draft. A
TRS is a derivatives contract where one party receives the total return of a
bond—coupon income plus price appreciation or depreciation without owning the
underlying security. The RBI said in the draft that a market maker can offer
TRS to resident other than an individual, without any restriction in terms of
purpose. TRS should not be offers to any individuals.
(Financial Express)
Ministry of Agriculture and Farmers Welfare Signs MoU with
Department of Posts against Fake Seeds, Fertilisers and Pesticides: The Ministry of Agriculture and Farmers
Welfare has signed a Memorandum of Understanding (MoU) with the Department of
Posts on 07.01.2026 to operationalize a standardized, faceless, and fully
traceable logistics mechanism for the transportation and quality control of
samples of seeds, fertilizers and pesticides. The MoU aims to ensure secure,
time-bound, and tamper-proof movement of samples from collection points to
designated laboratories, with end-to-end digital tracking.This digital and
logistics-enabled framework strengthens the agri-input quality control
mechanism through end-to-end digitization of key processes, including fixation
of quality control targets at the State level, collection and dispatch of
samples, laboratory analysis, generation of test reports, and initiation of
prosecution, wherever required.
(PiB)
OUTPUT GAP
§ The
term output gap refers to the difference between the actual output of an
economy and the maximum potential output of an economy expressed as a
percentage of gross domestic product (GDP). A country's output gap may be
either positive or negative.
§ A
negative output gap suggests that actual economic output is below the economy's
full capacity for output while a positive output suggests an economy that is
outperforming expectations because its actual output is higher than the
economy's recognized maximum capacity output.
RBI KEY RATES
Repo
Rate: 5.25%
SDF:
5.00%
MSF
/Bank Rate: 5.50%
CRR:
3.00%
SLR:
18.00%
FOREX RATES (RBI
REF. RATE)
INR /
1 USD : 90.4163
INR /
1 GBP : 122.7431
INR /
1 EUR : 106.6864
INR
/100 JPY: 57.6400
EQUITY INDEX
Sensex: 83580.40 (+266.47)
NIFTY: 25693.70 (+50.90)
Bnk
NIFTY: 60120.55 (+56.90)
Historical events: February 7th
marks significant historical milestones, including the 1992 induction of
India's first indigenously built submarine, INS Shalki, into the Navy.
Globally, it marks Grenada's independence (1974) and the 1964 arrival of The
Beatles in the U.S.. It is also celebrated as Rose Day, initiating Valentine's
Week.
****Have a nice
Day****
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