The RBI’s monetary policy committee (MPC) voted unanimously to keep the policy repo rate unchanged at 5.25% and a majority of the members voted to continue with the ‘neutral’ stance. Most analysts and economists polled by ET had predicted a status quo at this review.
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Like the last policy review, however, committee member Ram Singh retained his view that the stance be changed from neutral to accommodative.
In his post policy statement, governor Sanjay Malhotra said amidst heightened geo-political tensions and elevated uncertainty, the Indian economy is in a good spot with strong growth and low inflation.
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“On the growth front, economic activity remains resilient. The First Advance Estimates suggest a continuing growth momentum, driven by domestic factors amidst a challenging external environment. The growth outlook remains favourable. Based on a comprehensive review of the domestic macroeconomic conditions and the outlook, the MPC is of the view that the current policy rate is appropriate,” Malhotra said.Noting the momentum in private consumption, steady rural demand and improving agriculture activity, the central bank increased the GDP growth projections for the first and second quarters of the next fiscal year by 20 basis points each to 6.9% and 7% respectively.
One basis point is 0.01 percentage point.
The RBI kept its current year GDP forecast unchanged at 7.3%.
Inflation projection was also revised higher because of the impending base effect that will take the full-year Consumer Price Index (CPI) for the current fiscal to 2.1% from 2% and to 3.2% for the fourth quarter of the current fiscal from 2.9%.
Price Pressures
Inflation forecasts for the first and second quarters of the next fiscal year were also revised upward to 4% and 4.2%, respectively.
“Despite the anticipated momentum being muted, unfavourable base effects stemming from large decline in prices observed during the fourth quarter of 2024-25 would lead to an uptick in year-on-year inflation,” Malhotra said.
The 10-year benchmark yield, which opened at 6.63%, inched up to 6.69% after the policy statement. The rupee was trading at 90.26/$1, versus its previous close of 90.35/$1. The Nifty 50 was down 0.46% at 25,527.3, while the BSE Sensex shed 0.36% to 83,010.73. They were down 0.4% versus Thursday.
The governor also announced additional measures to enhance customer protection, advance financial inclusion, enhance flow of credit, strengthen UCBs, promote ease of doing business for NBFCs, and deepen financial markets, guidelines for which will be released in due course.
The RBI will issue three draft guidelines relating to mis-selling, recovery of loans and engagement of recovery agents, and on limiting liability of customers in unauthorised electronic banking transactions.
The central bank also proposes to introduce a framework to compensate customers up to an amount of Rs 25000/- for loss incurred in small-value fraudulent transactions.
The RBI will also publish a discussion paper on possible measures to enhance the safety of digital payments. Such measures may include lagged credits and additional authentication for specific classes of users, such as senior citizens, the governor said.
There will also be four measures for urban co-operative banks (UCBs) on raising the financial limits on unsecured loans and loans to nominal members by UCBs. The RBI also proposes to remove the tenor and moratorium related requirements on housing loans given by Tier III and Tier IV UCBs.
NBFCs having no public funds and customer interface, with asset size not exceeding Rs 1000 crore, are proposed to be exempted from the requirement of registration, Malhotra said.