11 April 2025 Current Affairs

Reserve Bank Of India (RBI) Cut The Repo Rate By 25 Basis Points To 6%

In its recent bi-monthly monetary policy review, the Reserve Bank of India (RBI) cut the repo rate by 25 basis points to 6%, marking the second consecutive rate cut. This move, driven by a need to stimulate economic growth amid escalating global uncertainties, signals a shift in policy stance from neutral to accommodative. The RBI’s Monetary Policy Committee (MPC), headed by Governor Sanjay Malhotra, emphasized concerns about weakening growth while remaining cautiously optimistic on inflation control.

Key Decisions and Announcements:

• Repo Rate Cut: Slashed by 25 bps to 6% to ease borrowing costs for home, auto, and business loans.
• Other Rates Adjusted:

- Standing Deposit Facility (SDF): 5.75%

- Marginal Standing Facility (MSF) & Bank Rate: 6.25%

• Policy Stance Shifted: From neutral to accommodative, suggesting further possible rate cuts to support growth.
• Global Context: The decision comes amid a global trade war, especially with U.S. tariffs affecting global growth and India’s exports.
• GDP Forecast Lowered:

- FY 2025-26 growth revised from 6.7% to 6.5%

- Quarterly projections: Q1 – 6.5%, Q2 – 6.7%, Q3 – 6.6%, Q4 – 6.3%

• Inflation Outlook (CPI):

- FY 2025-26 CPI forecast at 4%

- Q1 – 3.6%, Q2 – 3.9%, Q3 – 3.8%, Q4 – 4.4%

• Balanced Risks: Inflation risks are seen as evenly balanced; global slowdown may help lower commodity prices.
• Growth-Focused Policy: RBI aims for non-inflationary growth with stable demand, improved supply response, and macroeconomic balance.
• Digital Payments Boost: RBI allowed NPCI to raise UPI transaction limits for P2M (Person to Merchant) payments.

About the Reserve Bank of India (RBI):

• The Reserve Bank of India, established on 1st April 1935, is India’s central bank and primary monetary authority.
• It regulates the issuance and supply of the Indian rupee, manages the country's monetary policy, and ensures financial stability.
• The RBI also supervises commercial banks, manages foreign exchange under FEMA, and fosters development in financial markets. Its headquarters is in Mumbai, and it is currently headed by Governor Sanjay Malhotra.

India Terminates Trans-Shipment Facility For Bangladesh

The Indian government has withdrawn the trans-shipment facility that allowed Bangladesh to export goods to third countries using Indian land customs stations (LCSs), ports, and airports. This facility, operational since June 2020, had eased trade for Bangladesh with countries like Bhutan, Nepal, and Myanmar. However, citing congestion, rising freight costs, and pressure from Indian exporters, especially in the apparel and textile sectors, the facility has now been rescinded with immediate effect, per a circular issued by the Central Board of Indirect Taxes and Customs (CBIC) on April 8, 2025.

Key Highlights:

1. Facility Withdrawn:

• India ended the trans-shipment route granted to Bangladesh in June 2020, effective immediately.

2. Old Cargo Exception:

• Shipments already in India will be allowed to exit as per earlier procedures.

3. Indian Exporters’ Demand:

Exporters from apparel, footwear, gems & jewellery sectors requested the withdrawal due to:

• Congestion at Delhi air cargo complex
• High freight costs
• Loss of air cargo space to Bangladeshi exports

4. Impact on Logistics:

• Expected freight rate rationalization and improved cargo flow for Indian exporters
• Likely decongestion of IGI Airport cargo terminal

5. AEPC’s Concerns:

• 20–30 loaded trucks from Bangladesh daily slowed cargo movement
• Air freight costs increased; Indian exporters became uncompetitive

6. GTRI Analysis:

• Withdrawal will disrupt Bangladesh’s export-import logistics
• Could affect Nepal and Bhutan, who use Indian routes to trade with Bangladesh

7. Geopolitical Angle:

• Bangladesh’s proposed strategic base near Chicken’s Neck with Chinese support may have influenced India’s decision

8. Tariff Access to Bangladesh:

• India has allowed zero-duty access to nearly all Bangladeshi goods for two decades (except alcohol and cigarettes)

India–Bangladesh Relations: A Snapshot

• Close Neighbours: Share deep historical, cultural, and linguistic ties.
• Connectivity: India provides transit access for Bangladeshi cargo through its ports and road/rail networks.
• Trade Benefits: Bangladesh enjoys zero-duty access to the Indian market under SAFTA.
• Water Sharing & River Issues: Disputes over Teesta river sharing have been long-standing.
• Border Security: Collaborative efforts exist, but challenges remain regarding illegal migration and smuggling.
• Economic Ties: India is one of Bangladesh’s largest trade partners; both countries benefit from bilateral trade and infrastructure projects.
• Strategic Importance: Bangladesh plays a key role in India’s “Act East” policy and regional connectivity efforts.
• Recent Strains: Tensions have emerged post-political instability in Bangladesh and rising Chinese influence.

Joint Nilgiri Tahr Census

To mark the 50th anniversary of Eravikulam National Park, Kerala and Tamil Nadu will conduct a joint Nilgiri Tahr census from April 24 to 27. The synchronised effort spans both protected and non-protected habitats of the species. The Nilgiri Tahr is a vulnerable, endemic species of the Western Ghats.

Key Highlights:

1. Wide Coverage: The census will cover 89 blocks in Kerala and 176 in Tamil Nadu, including 20 forest divisions from Thiruvananthapuram to Wayanad.
2. Scientific Approach: Use of camera traps and pellet sampling for genetic studies and accurate estimation.
3. Massive Participation: Over 1,300 team members, including trained volunteers and forest officials, will conduct the survey using the bounded count method.
4. Conservation Focus: The initiative aims to assess and protect the Nilgiri Tahr population, enhancing conservation strategies.
5. Nodal Officer Appointed: Pramod P.P., Field Director of the Periyar Tiger Reserve, will serve as the nodal officer coordinating the census.

Market-Based Securitisation Framework For Stressed Assets

The Reserve Bank of India (RBI) is set to introduce a market-based securitisation framework for stressed assets, offering an alternative to the existing Asset Reconstruction Company (ARC) mechanism under the SARFAESI Act, 2002.

This move aims to enhance the resolution of non-performing assets (NPAs) by enabling their transfer to a Special Purpose Entity (SPE), which will issue securitisation notes to investors. The RBI believes a well-structured transaction can improve risk distribution and provide exit options for lenders.

The framework, now open for public comments, follows a discussion paper released in January 2023 and recommendations from a 2019 task force focused on developing a secondary market for corporate loans.

Key Facts:

1. RBI to introduce a securitisation framework for stressed assets alongside the ARC route under SARFAESI Act, 2002.
2. The draft framework follows a January 2023 discussion paper and is now open for public comments.
3. Under the model, NPAs will be sold to an SPE, which will issue securitisation notes to investors.
4. The servicing entity will manage recovery, and payouts to investors will follow a waterfall mechanism.
5. This move addresses the challenge of unpredictable cash flows from stressed assets and seeks to build a secondary market for corporate loans.

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