Mumbai: The Reserve Bank of India (RBI) announced its decision on key rates following the conclusion of its three-day Monetary Policy Committee (MPC) meeting. RBI Governor Shaktikanta Das on Thursday said that MPC has decided to keep the policy repo rate unchanged at 6.5 per cent as inflation moderates. The rate increase cycle was paused in April after six consecutive rate hikes aggregating to 250 basis points since May 2022.
The repo rate is the rate of interest at which RBI lends to other banks.
Repo rate remains unchanged
Announcing the bi-monthly monetary policy, RBI Governor, “The Monetary Policy Committee (MPC) unanimously decided to keep the rate unchanged at 6.5 per cent.” While keeping the interest rate intact, Das said headline inflation still remains above RBI's target of 4 per cent and is expected to remain so during the rest of the year.
The inflation projection has been slashed marginally to 5.1 per cent from an earlier estimate of 5.2 per cent for the current financial year. He said retail inflation has been below the upper band of 6 per cent for the last two years.
The MPC meeting took place against the backdrop of consumer price-based (CPI) inflation declining to an 18-month low of 4.7 per cent in April. The Reserve Bank governor recently indicated that the May print would be lower than the April numbers. The CPI for May is scheduled to be announced on June 12. The government has mandated RBI to ensure CPI inflation at 4 per cent with a margin of 2 per cent on either side.
SDF rate remains at 6.25 pc
RBI Governor said that the Standing Deposit Facility (SDF rate) remains at 6.25 per cent and the marginal standing facility and the bank rates stand at 6.75 per cent. The MPC also decided by a majority of five out of six members to remain focused on the withdrawal of accommodation to ensure that inflation progressively aligns with the target while supporting growth, said RBI Governor Das.
RBI retains FY24 GDP growth forecast at 6.5 pc
The RBI has retained the GDP growth projection for the current fiscal year at 6.5 per cent, on the back of supportive domestic demand conditions. In April, the central bank had marginally revised upwards the 2023-24 GDP growth projection to 6.5 per cent, from its earlier forecast of 6.4 per cent.
“Domestic demand condition remains supportive of growth and also the demand in rural areas is on the revival path,” Das said while announcing the 2nd bi-monthly policy for 2023-24. India's economy grew 6.1 per cent in the fourth quarter of 2022-23, pushing up the annual growth rate to 7.2 per cent, as against the 7 per cent anticipated earlier.
RBI marginally lowers FY'24 inflation projection to 5.1 pc
RBI marginally lowered its inflation projection for the current financial year to 5.1 per cent. In April, the Reserve Bank had estimated the consumer price index (CPI) based retail inflation at 5.2 per cent during the fiscal 2023-24. CPI inflation fell sharply to 4.7 per cent in April 2023, from 6.4 per cent in February, on the back of favourable base effects, with softening observed across all three major groups.
"In India, consumer price inflation eased during March-April 2023 and moved into the tolerance band (2-6 per cent), declining from 6.7 per cent in 2022-23. Headline inflation, however, is still above the target as per the latest data and is expected to remain so according to our projections for 2023-24," Das said while announcing the second bi-monthly monetary policy of 2023-24.
The RBI has projected the CPI inflation at 5.1 per cent for 2023-24 -- Q1 at 4.6 per cent, Q2 at 5.2 per cent, Q3 at 5.4 per cent and Q4 at 5.2 per cent -- with risks evenly balanced.
RBI allows banks to issue Rupay prepaid Forex cards
The RBI permitted banks to issue Rupay prepaid foreign exchange (forex) cards for Indians travelling abroad, said RBI Governor. The decision is part of the internationalisation of the Rupay card. Announcing the decision, Das said the Rupay debit and credit cards are gaining increased acceptance abroad. He said the banks are now permitted to issue Rupay prepaid forex cards for Indians travelling abroad.
Das said the Rupay prepaid Forex cards will expand the payment options for Indians going abroad. The RBI Governor also said Rupay cards will also be enabled for issuance in foreign jurisdictions.
(With agencies input)
