The Reserve Bank of India (RBI)'s Monetary Policy Committee (MPC) opted to maintain the policy rate, the repo rate, at 6.5% on Friday, marking the eighth consecutive meeting without a change. This decision implies that interest rates will remain steady, delaying prospects for cheaper loans and lower EMIs. RBI Governor Shaktikanta Das announced the decision, stating, "GDP growth that we are now projecting for the current financial year 2024–25 is 7.2% with Q1 at 7.3%, Q2 at 7.2%, Q3 at 7.3%, and Q4 at 7.2%. The risks are evenly balanced."
Key highlights from the RBI MPC meeting
Repo rate decision: The MPC voted 4-2 to maintain the repo rate at 6.5%.
GDP growth projection: The MPC revised its projection for real GDP growth for FY 2024-2025 to 7.2%, up from the previous estimate of 7%.
Inflation forecast: The RBI maintained its inflation forecast for the current fiscal year at 4.5%.
Foreign exchange reserves: As of May 31, India's foreign exchange reserves reached a record high of $651.5 billion.
Interest rates: The Standing Deposit Facility (SDF) rate remains at 6.25%, while the Marginal Standing Facility (MSF) and bank rate are maintained at 6.75%.
Automatic balance replenishment: The RBI announced the integration of automatic balance replenishment for Fastag, NCMC, and UPI-Lite wallets into the e-mandate framework.
Digital payments intelligence platform: The central bank plans to establish a Digital Payments Intelligence Platform to leverage advanced technologies in reducing payment fraud risks.
Bulk deposits threshold increase: The threshold for bulk deposits has been increased from Rs 2 crore to Rs 3 crore.
Inflation and external risks: Despite ongoing deflation in fuel prices, food inflation remains high. The MPC is watchful of external inflation risks, particularly food inflation, which could hinder progress toward disinflation. The committee is committed to restoring inflation to the target rate of 4% on a sustainable basis. Governor Das emphasized the flexibility of monetary policy in achieving price stability.
Governor's statement on economic conditions: "The inflation growth balance is moving favourably. Growth is holding firm, and inflation continues to moderate, mainly driven by the core component, which reached its lowest level in the current series in April 2024. The deflation in fuel prices is ongoing; food inflation, however, remains elevated," said Governor Shaktikanta Das.
The MPC, which is responsible for setting the rates, comprises three external members—Shashanka Bhide, Ashima Goyal, and Jayanth R Varma—and three RBI officials.
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