RBI latest Monetary Policy to promote Digital Transfer

RBI latest Monetary Policy to promote Digital Transfer

The Reserve Bank of India had recently made announcements, and the main highlight of them is the 25-basis point cut in the repo rate. The repo rate is the interest rate which the RBI lends money to banks; the RBI's lowering down the repo rate could lead banks also bringing down interest rates on home and vehicle loans. The RBI likewise announced it was scrapping charges connected towards NEFT and RTGS transfers as well.

The RBI Governor Shaktikanta Das at the end of the three-day bi-monthly monetary policy also made an announcement that RBI is bringing down of the GDP growth forecast for financial 2019-20. The RBI reconsidered the forecast from 7.2% to 7% while slightly increasing the forecast for retail inflation to 3% to 3.1%.

Top highlights from RBI's monetary policy:

The main highlight was the cut in the repo rate or the interest rate that the RBI levies on banks borrowing money from it. The RBI cut the repo rate by 25 basis points to 5.75 percent. This is the lowest the repo rate has been in 9 years. With the cut of the repo rate, the RBI is signaling that the central bank is aiming at increasing spending and boosting purchasing power.

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The RBI also waived off charges imposed on online money transfers carried out by means of either National Electronic Funds Transfer (NEFT) or Real Time Gross Settlement System (RTGS). The central bank has requested that commercial banks pass on this advantage to the clients. This will make NEFT and RTGS transfers free of cost, which, the RBI is aiming, would support digital transactions in the country.

The Real Time Gross Settlement System (RTGS) is intended for large-value instantaneous fund transfers while the National Electronic Funds Transfer (NEFT) System is utilized for fund transfers up to Rs 2 lakh.

Presently, The State Bank of India (SBI) currently charges between Re 1 and Rs 5 for NEFT transactions and between Rs 5 and Rs 50 for RTGS. In order to give an impetus towards digital funds movement, it has been decided that the charges levied by the RBI for transactions processed in the RTGS and NEFT system, would now likely go away.  Also, these charges on NEFT and RTGS are applicable as per transaction basis and attract Goods and Services Tax (GST) at the rate of 18%. A person could only transfer funds using RTGS on any working day between Monday and Saturday either via internet banking or bank branch.

However, there have been demands made to the Reserve bank of India regarding changing the ATM charges and fees also. Thus, the central bank has decided to review the charges levied on ATM transactions. Presently, banks levy fees on a range of ATM services, which is deepening on whether you're utilizing your own banks' ATM or not, an individual might be charged fees on money withdrawal, printing account statement or changing your debit cards PIN.


eStartIndia Team

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