On Friday, the Reserve Bank maintained its GDP growth forecast at 7 percent for the 2024-25 financial year, which is slightly lower than the previously estimated expansion of 7.6 percent for FY24. The RBI had initially projected a GDP growth rate of 7 percent in its February monetary policy for the fiscal year commencing on April 1. Inflation for FY25 is anticipated to stand at 4.5 percent, with the first quarter expected at 4.9 percent, the second quarter at 3.8 percent, the third quarter at 4.6 percent, and the fourth quarter at 4.5 percent.

During the  meeting of the Monetary Policy Committee (MPC), Reserve Bank of India (RBI) Governor Shaktikanta Das issued a strong reminder to banks and non-banking financial companies (NBFCs) regarding their responsibility in handling public funds.

Das emphasized the critical importance of maintaining high standards of governance and adhering to regulatory guidelines for financial entities. He stressed that these institutions primarily operate with public funds, including deposits in banks and certain NBFCs, as well as investments in various financial instruments.

The RBI has been closely monitoring the evolving risks within the financial sector to mitigate potential threats. Recent actions by the RBI demonstrate its commitment to ensuring compliance and addressing supervisory concerns. For instance, the central bank took stringent measures against Paytm Payments Bank, a subsidiary of fintech giant Paytm, due to non-compliance issues, including concerns related to the creation of accounts without proper identification, raising potential money laundering risks.

Additionally, the RBI intervened with IIFL Finance Ltd and JM Financial Products Ltd, instructing them to halt certain lending activities, such as gold loans and loans against shares, respectively.

The central bank's proactive approach to enforcing regulatory standards has garnered recognition from rating agency S&P Global Ratings. According to S&P, the RBI's actions are aimed at improving governance and transparency within the sector, which will help curb excessive risk-taking by lenders, foster a culture of compliance, and protect customers' interests.

However, these regulatory measures may also result in higher capital costs for financial institutions. S&P Global credit analyst Geeta Chugh highlighted that while the RBI's efforts signal a commitment to strengthening the financial sector, increased regulatory scrutiny could potentially hinder growth and elevate the cost of capital for these institutions.

S&P further noted that the RBI has become less tolerant of non-compliance issues, customer grievances, data privacy concerns, governance lapses, as well as deficiencies in know-your-customer (KYC) and anti-money laundering practices.

RBI's Monetary Policy Live Update: Sensex, Nifty Start Lower Ahead of RBI Decision

RBI Expected to Maintain Interest Rates: Economists Predict 7th Consecutive Steady Repo Rate

RBI's Policy Panel Begins Talks on Monetary Measures; Decision Due Friday