Context: The monetary policy committee (MPC) of Reserve Bank of India (RBI) on Friday took a decision to keep the policy repo rate unchanged at 6.5 per cent-the status quo for an 11th straight time. Key Highlights: Food prices, which have driven up headline retail inflation in recent months, are expected to cool off in the January-March quarter, which might present a case for reducing rates in the next review of policy in February. Cuts Cash Reserve Ratio reduces to 4 Percent Reason Behind the CRR Cut Benefit from CRR Cut RBI Revision of Ceiling on Interest Rate for NRI FCNR (B) Deposits RBI to Enhance FCNR(B) Interest Rates for Deposits. Detailed report of the meeting: – No Change in Policy Rates: After the end of the 11th successive meeting, the RBI’s rate-setting panel decided to keep the repo rate constant at 6.5%. – CRR Reduced: The CRR for the banks has reduced from 4.5% to 4% in two tranches. The reason is that this is now expected to make the banks easily accessible to liquidity as the RBI anticipates liquidity becoming tight in the coming days. – Forecasts For GDP Growth and Inflation – “GDP growth projection” has been tapered down from 7.2% to 6.6% for FY25. -Inflation projection was increased to 4.8% from 4.5%. – Inflation Risks: High inflation, according to RBI Governor Shaktikanta Das, erodes the ability of consumers to purchase and therefore adversely affects both consumption and investment demand leading to negative growth.– MPC Voting:– Four MPC members voted to maintain the repo rate at 6.5%.– The other two external members, i.e. Nagesh Kumar and Ram Singh, preferred a 25 basis point rate cut. – Focus on Inflation Control: RBI stressed its commitment towards aligning inflation with its target and fighting the price spiral. The MPC remains focused on ensuring sustainable inflation control so that it can support long-term growth. -MPC Stand: All Six MPC Members Agreed on a Neutral Stand To Leave the RBI with Its Arm and Leg Because Consideration of Future Inflation Trends Would Derive Yet More Appropriate Cuts or Hikes. -Liquidity BoostThis will infuse INR 1.16 lakh crore into the banking system, which is expected to enable banks to lend more and hence improve their margins. -Increased Ceiling Interest Rates on the FCNR(B) Depo

What is Monetary Policy? Monetary Policy is a set of macroeconomic tools used by the Central Bank for influencing the money supply in the economy to achieve the macroeconomic goals decided. For sustainable economic growth, monetary policy is used by a nation’s central bank to control the overall supply of money. Objectives of Monetary Policy The major objectives of monetary policy are mentioned below: Differences between Monetary Policy and Fiscal Policy These two policies differ in various aspects as mentioned below: Aspect Monetary Policy Fiscal Policy Definition Policy related to money supply, credit, and interest rates. Policy related to government spending, taxation, and borrowing. Authority Formulated & implemented by the Reserve Bank of India (RBI). Formulated & implemented by the Government of India (Ministry of Finance). Main Objective Price stability, controlling inflation, ensuring financial stability, promoting growth. Economic development, redistribution of income, employment generation, reducing inequality. Key Tools – Repo rate, Reverse repo rate, CRR, SLR, OMO, MSF. – Changes in money supply & credit availability. – Government expenditure (infrastructure, subsidies, welfare). – Taxation policies (direct & indirect taxes). – Public borrowing (via bonds, loans). Nature Mainly short-term instrument (quick adjustments to demand-supply of money). More long-term (structural impact on economy). Control Mechanism Controls demand side of economy (through credit and money availability). Controls supply side by allocating resources, investments, and subsidies. Impact on Deficit/Debt Does not directly affect fiscal deficit or public debt. Directly affects fiscal deficit and debt levels (through borrowing and spending). Independence Generally independent of politics (RBI is autonomous). Highly influenced by government’s political and social priorities. Types of Monetary Policy There are basically two types of monetary policies: What is Expansionary Monetary Policy? What is Contractionary Monetary Policy? What is Monetary Policy in India? In India, the RBI Act 2016 (Reserve Bank of India Act) directly mandates RBI with the responsibility of formulating monetary policy for the country. The Reserve Bank of India Act, 1934 was amended in 2016 to provide statutory basis for a monetary policy framework, the MPC and the inflation target to be set by the Government of India, in consultation with the Reserve Bank, once in every five years. The process of this policy in India underwent a paradigm shift in 2016 as mentioned below: PRE-2016 POST-2016 Monetary Policy and Inflation in India – FIT Framework Background Prominent Provisions Pros of Flexible Targeting (FIT) Cons of Flexible Inflation Targeting (FIT) Monetary Policy Committee (MPC) Major Provisions of MPC Composition of MPC Tools of Monetary Policy in India There are different instruments used by the RBI for controlling the money supply, which can be categorized into two categories: Drawbacks of Monetary Policy

RBI Raises Interest Rate Cap on FCNR Accounts (Banks)/FCNR(B) Deposits for Foreign Currency Non-residents.

Context: Central bank of India has developed an AI/ML based open-source tool known as MuleHunter.AI to trace killer accounts used in financial frauds. Key Highlights: Successful Pilot: The two state-run banks that piloted it succeeded in more collaboration within the Reserve Bank Innovation Hub (RBIH) for the development of the tool. Ongoing RBI Efforts Against Digital Frauds: RBI has launched numerous initiatives such as strengthening cyber security, issuance of fraud prevention guidelines, and transaction monitoring among many others to tackle digital fraud in the financial sector. Mule Accounts and Financial Frauds: In the financial fraud world, mule accounts serve as a transfer point for fraudsters, who use it to channel illegal transactions. The RBI is working on a hackathon on Zero Financial Frauds specifically around mule accounts. Increasing Mule Account Activity: The mule account activity in India is on the rise. Cities such as Bhubaneswar, Lucknow, and Navi Mumbai are the top three with the highest numbers. Encouraging Innovation: The hackathon is also an initiative by RBI to encourage development efforts of such innovative solutions fighting against mule accounts and frauds. Industry Support: The CEO of KiyaAi, Rajesh Mirjankar, termed MuleHunter.AI as an “AI-driven initiative,” which is very significant for the “detection and prevention of fraud,” specifically mule accounts fraud. Collaborative Approach: