he Reserve Bank of India (RBI) Monetary Policy Committee (MPC) has kept repo rates unchanged at 6.5 percent. It has also decided to remain focused on the withdrawal of the accommodative stance, Governor Shaktikanta Das said. This is the sixth consecutive unchanged decision and comes after the Interim Budget was announced on February 1, 2024.
RBI Monetary policy — Key highlights
- RBI MPC Meet Highlight: MPC decides to keep repo rate unchanged at 6.5 percent, says RBI Governor Das. In the previous MPC session, the RBI sustained the repo rate at 6.5 percent for the fifth consecutive time. The most recent adjustment was made in February 2023, elevating the rate from 6.25 percent.
- RBI MPC Economic Update: “The Indian government is adhering to the path of fiscal consolidation. Domestic agri activity is holding up well despite lower inflation and lower reservoir levels. Services sector activity is expected to remain resilient,” says Das. The financial system remains robust with a healthy balance sheet, he added.
- RBI MPC Growth Forecast: Real GDP growth for FY25 is projected at 7 percent, with Q1 growth at 7.2 percent, Q2 at 6.8 percent, Q3 at 7 percent and Q4 at 6.9 percent.
- RBI MPC Inflation Forecast: Headline inflation moderated to 5.5 percent on average during April-December 2023 from 6.7 percent during the whole of 2022-23.January-March 2024 CPI inflation forecast lowered to 5.0 percent from 5.2 percent. April-June 2024 CPI inflation forecast lowered to 5.0 percent from 5.2 percent. July-September 2024 CPI inflation forecast retained at 4.0 percent. October-December 2024 CPI inflation forecast lowered to 4.6 percent from 4.7 percent. January-March 2025 CPI inflation forecast pegged at 4.7 percent.
- RBI MPC Liquidity Measures: Systemic liquidity shifted to a deficit in September 2023 after four-and-a-half years. However, after accounting for government cash balances, potential liquidity in the banking system remains surplus, stated RBI Governor Shaktikanta Das.He reiterated that the Indian rupee’s exchange rate is market-driven, showcasing recent stability despite a stronger US dollar and elevated US Treasury yields, reflecting India’s economic strength. Governor Das also disclosed that India’s foreign exchange reserves stood at $622.5 billion as of February 2, 2024.
- RBI MPC Update on Retail and MSME Loans: To enhance transparency, the requirement of a Key Fact Statement is being extended to cover all retail and MSME loans. Banks will get some time to comply with this action.
- RBI MPC Update on Digital Transactions: the RBI unveiled a framework for authenticating digital payment transactions. Governor Shaktikanta Das explained during the MPC announcement that the framework aims to enhance digital security through a principle-based approach. Das noted that the RBI has not specified any specific Additional Factor of Authentication (AFA), but the payments industry has predominantly embraced SMS-based One-Time Passwords (OTPs). He added that detailed instructions for implementing the framework will be issued separately.
- RBI MPC Decides to Review ETP: The RBI announced its decision to review the framework for electronic trading platforms (ETP) in response to requests from market makers. The central bank had established a regulatory framework for ETPs in October 2018 to facilitate transactions in financial instruments under its regulation. However, with the increasing integration of onshore forex markets with offshore counterparts, advancements in technology, and diversification of products, the RBI noted significant developments in the landscape. Market makers have also sought access to offshore ETPs offering permitted Indian Rupee (INR) products. Consequently, the RBI has opted to reassess the regulatory framework for ETPs to address these evolving dynamics.
- RBI MPC on macroeconomic stability: The RBI Governor said that the multi-pronged and proactive policies have worked well to maintain and strengthen macroeconomic and financial stability.
- RBI Press Conference on Paytm: RBI Deputy Governor Swaminathan J stated that they refrain from discussing specifics regarding action taken on Paytm Payments Bank. The action is a result of persistent non-compliance, following extensive engagement and highlighting of deficiencies over months or even years. Such regulatory measures aim to safeguard consumer interests, reflecting the responsibility of the regulator.
- RBI Press Conference Live Updates: Shaktikanta Das stated that he couldn’t provide any forward guidance regarding the conditions necessary for a policy stance change to neutral. He emphasized the presence of numerous uncertainties, making it impractical to offer forward guidance in such an environment.
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