Monetary policy financially inclusive by design, says RBI

Mumbai, December 24

The country’s monetary policy is, by design, financially inclusive and this strategy will result in policy effectiveness and welfare maximisation going ahead, RBI’s Deputy Governor Michael D Patra said on Friday.

Speaking at an event organised at Indian Institute of Management (IIM), Ahmedabad, he said monetary policy maximises human welfare by minimising the deviations of output from its potential and inflation from the target.

Tokenisation deadline extended by 6 mths

The RBI has extended the card-on-file tokenisation deadline by six months to June 30, 2022, in view of various representations received from industry bodies
Card-on-file refers to card information stored by payment gateway and merchants to process future transactions
The earlier deadline was December 31, 2021

“The evidence is still forming and strong conclusions from its analysis may be premature, but India’s monetary policy is, by design, financially inclusive and it will reap the benefits of this strategy in the future in terms of effectiveness and welfare maximisation,” Patra said.

He said the financial inclusion in the country appears to have gone up, with the level of the RBI’s financial inclusion index (FI-index) rising from 49.9 in March 2019 to 53.1 in March 2020 and further to 53.9 in March 2021, he said.

The index, which was released in September 2021, takes values from 0 to 100 and implicitly sets the goal for the RBI — 100% financial inclusion for India.

Patra said although it is empirically observed that there is a two-way relationship between monetary policy and financial inclusion, it is unambiguous that financial inclusion is able to dampen inflation and output volatility.

This, he said, is achieved by smoothing consumption by enabling people to draw down financial savings in difficult times for everyday needs. In the process, it makes people interest-sensitive. — PTI