RBI Governor-led MPC Keeps Repo Rate Unchanged At 6.50%
The Monetary Policy Committee voted 5:1 majority to maintain the withdrawal of the accommodation stance to ensure inflation aligns with target while supporting growth.
![RBI Governor-led MPC Keeps Repo Rate Unchanged At 6.50% | File Picture](https://media.assettype.com/freepressjournal/2022-12/3af585a1-9817-4576-b29b-039a3128122c/RBI_GUV.png?width=1200)
RBI Governor-led MPC Keeps Repo Rate Unchanged At 6.50% | File Picture
The Reserve Bank Governor Shaktikanta Das on Friday announced that the Monetary Policy Committee (MPC) has decided to keep the interest rates unchanged at 6.50 percent. The decision to keep the policy interest rate unchanged was unanimous, said the RBI Governor. This is the fifth time that the 6 member Monetary Policy Committee has decided to keep the key rates unchanged.
The Monetary Policy Committee voted 5:1 majority to maintain the withdrawal of the accommodation stance to ensure inflation aligns with target while supporting growth.
Consequently, the Marginal Standing Facility (MSF) rate and the bank rate were at 6.75 per cent and the Standing Deposit Facility (SDF) rate remained at 6.25 per cent.
Das said, the MPC will remain "actively disinflationary".
During his speech, he announced the increase of e-mandate for recurring payments to Rs 1 lakh from the existing Rs 15,000. Additionally, the RBI elevated the UPI payment limits for hospitals and educational institutions from Rs 1 lakh to Rs 5 lakh per transaction.
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Furthermore, the RBI intends to establish guidelines for web aggregators of loan products to enhance transparency in digital lending.
As of December 1, 2023, India's forex reserves reached USD 604 billion, said the RBI Governor.
Inflation
In October, retail inflation in India continued its downward trend, backed by a decrease in certain sub-indexes. The consumer price index (CPI) for October reached a four-month low at 4.87 petrcent, down from the previous month's 5.02 percent. Despite being within the RBI's comfort range of 2-6 percent, India's retail inflation remains above the ideal scenario of 4 percent.
GDP
Das also highlighted about the GDP growth in the second quarter.
During the July-September period of the fiscal year 2023-24, the Indian economy surged by 7.6 percent, maintaining its position as the fastest-growing major economy. In the April-June quarter, India's GDP growth stood at 7.8 percent.
Growth projection
The growth projection has been raised to 7 percent for the current financial year from 6.5 per cent earlier, according to Das.
The central bank projected the Consumer Price-based Inflation (CPI) based retail inflation at 5.4 percent for the current fiscal.
MPC meet
The three-day meeting where the decision was made started on Wednesday this week. The MPC meeting took place against the backdrop of inflation declining to 4.87 percent in October. The November print of inflation is expected to be released next week.
The government has mandated RBI to ensure CPI inflation at 4 per cent with a margin of 2 percent on either side.
Repo rate pause
The RBI in total had raised its repo rate by 250 points cumulating to 6.5 per cent since May 2022 before it decided to put a pause on the cycle. Although inflation decreased to a four-month low of 4.87 percent in October, it is anticipated to persist above the RBI's 4 percent medium-term target for a considerable duration.
For those not aware, Repo rate is the rate of interest at which the central bank lends to other banks in the country.
The RBI holds six bi-monthly meetings in a financial year where decisions on interest rates, inflation outlook, money supply and other macroeconomic indicators are made.
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