RBI Governor Shaktikanta Das announced that the Reserve Bank of India (RBI) has decided to keep the key interest rates unchanged in the RBI MPC meeting. RBI will maintain its “withdrawal of accommodation” stance to bring inflation closer to its target of 4 per cent. In the RBI MPC meeting, the Monetary Policy Committee (MPC) voted by a 5 to 1 majority to keep the policy rate unchanged at 6.5 per cent after a detailed assessment of evolving macroeconomic and financial developments and the outlook.
This decision marks the sixth consecutive meeting where the MPC has maintained a status quo on the repo rate, reflecting its concern over retail inflation persisting above the 4% target. RBI projects CPI for FY24 at 5.4% and 4.5% in FY25, while real GDP growth for FY25 is pegged at 7%. RBI Governor Shaktikanta Das also mentioned the central bank’s engagement with Paytm over regulatory matters, stating that all actions taken are in the best interest of systemic stability and customers.
Key Highlights in RBI MPC Meeting
- RBI maintained the benchmark interest rate or repo rate at 6.5% during the February 2024 MPC meeting.
- GDP growth for FY25 is projected at 7%, slightly lower than the 7.3% growth expected for the current fiscal year.
- Retail inflation is anticipated to average 5.4% for the current fiscal year, with an expected decline to 4.5% in FY25.
- Monetary transmission by financial institutions remains incomplete, indicating challenges in transmitting policy rate changes to lending rates.
- The current economic momentum is expected to be sustained in the next fiscal year.
- Recovery in rabi sowing, sustained profitability in manufacturing, and resilience of services are expected to support economic activity in FY25.
- The investment cycle is gaining momentum, with signs of revival in private sector capital expenditure.
- The Indian economy is confidently progressing on a strong and sustained growth path.
- Rural demand continues to gather pace while urban consumption remains robust.
- The government is adhering to the fiscal consolidation path, with domestic economic activity showing strength.
- Uncertainty in food prices continues to impact headline inflation.
- Increasing geopolitical tensions are putting pressure on commodity prices and impacting supply chains.
- Forex reserves stand at $622.5 billion, providing comfort for meeting foreign obligations.
- The domestic financial system remains resilient, with a healthy balance sheet.
- Regulated entities are urged to prioritize compliance and consumer interest protection.
- RBI plans to introduce offline functionality in CBDC-Retail for transactions in areas with poor or limited internet connectivity.
- The exchange rate of the Indian rupee has remained relatively stable in the current fiscal year.
- RBI will review the regulatory framework for electronic trading platforms to facilitate market makers’ access to offshore ETPs offering permitted Indian Rupee products.
- Lenders are instructed to provide key fact statements (KFS) about loan agreements, including all-inclusive interest costs, to borrowers for retail and MSME loans.
- The next monetary policy committee (MPC) meeting is scheduled for April 3-5, 2024.
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