The rate setting panel’s meeting was concluded on August 7, 2024 where it held discussions on policy stance, keeping in mind current inflation trends.
The MPC maintained its stance of ‘withdrawal of accommodation’ and kept the key interest rate unchanged at 6.50 per cent.
The last hike was in February 2023 and since then the central has maintained status quo 8 times in a row.
Also Read: Catch all live updates drom RBI MPC meeting
Four out of the six MPC members voted to keep the repo rate unchanged. Jayanth Varma and Ashima Goyal, however, favoured a 25 basis point cut in the policy repo rate and a shift to a neutral stance.The Standing Deposit Facility (SDF) rate remained steady at 6.25 percent, while the Marginal Standing Facility (MSF) rate and the Bank Rate were both held at 6.75 percent. Additionally, the committee reiterated its commitment to maintaining the inflation target at 4 percent.Also Read: RBI MPC Meet Highlights 2024: Das & Co likely to keep rates and stance unchanged
Here’s a quick look at all key decisions from RBI MPC meet
Policy decision:
Repo rate: 6.50%
SDF: 6.25%
MSF: 6.75%
Stance: Withdrawal of accomodation
GDP Projection
- The real GDP forecast for FY25 was kept unchanged at 7.2%
- Q1 slightly reduced to 7.2 from 7.3 per cent
- Q2 at 7.2 per cent
- Q3 at 7.3 per cent
- Q4 at 7.2 per cent
Inflation
- Inflation forecast for FY25 unchanged at 4.5 per cent
- Q2 has been hiked to 4.4 per cent from 3.8 per cent
- Q3 projection raised to 4.7 per cent from 4.6 per cent
- Q4 projection eased to 4.3 per cent from 4.5 per cent.
Current Account Deficit
India’s current account deficit (CAD) moderated to 0.7 per cent of GDP in 2023- 24 from 2.0 per cent of GDP in 2022-23 due to a lower trade deficit and robust services and remittances receipts.
Forex
- Net inflows of US$ 9.7 billion recorded during JuneAugust (till August 6)
- FDI flows picked up in 2024-25 as gross FDI rose by more than 20 per cent during April-May 2024
- Net FDI flows doubled during April-May period compared to the corresponding period of the previous year.
- India’sforeign exchange reserves reached a historical high of US$ 675 billion as of August 2,2024.
Monsoon impact
- After a weak and delayed start, the cumulative southwest monsoon rainfall has picked up with improving spatial spread, RBI said.
- A degree of relief in food inflation is expected from the pick-up in the south-westmonsoon and healthy progress in sowing, as per the RBI chief.
- RBI Governor Shaktikanta Das said that going forward, the Indian Meteorological Department’s (IMD) projection of above normal southwest monsoon and healthy kharif sowing will support improving rural demand.
- Das said that the likelihood of La Niña conditionsdeveloping during the second half of the monsoon season is likely to have a bearingon agricultural production in 2024-25.
Financial Stability
The RBI governor highlighted four issues that need focus even though stability in financial sector persists.
1. Household savings: Banks face slower deposit growth compared to loans, leading to reliance on short-term non-retail deposits, risking liquidity issues. A focus on mobilizing household savings through innovative products is recommended.
2. Personal Loan Growth: Despite moderated credit growth in some sectors, personal loans are still growing rapidly, necessitating careful monitoring of leverage and reassessment of underwriting standards.
3. Top-up Loan Practices: Rapid growth in home equity and top-up loans, especially on collateralized loans, with some entities not adhering to regulatory guidelines, could lead to unproductive or speculative fund use. A review and corrective actions are advised.
4.IT Outages and Resilience: A global IT outage showed the dependence on big-techs and third-party providers. Banks need stronger IT, cybersecurity, and outsourcing risk management frameworks, along with robust business continuity plans.
Other announcements
- RBI proposes creating a public repository of digital lending apps to prevent unauthorized lenders.
- UPI tax payment limit increased from Rs 1 lakh to Rs 5 lakh per transaction.
- Continuous cheque clearing proposed to reduce clearance time to a few hours.
- Credit information reporting frequency increased from monthly to fortnightly by credit institutions to credit information companies.
- Introduction of “Delegated Payments” in UPI proposed, allowing a primary user to set transaction limits for a secondary user on the primary user’s bank account.