RBI Reduce CRR: Reserve Bank of India (RBI) Governor Shaktikanta Das announced the decisions of the last Monetary Policy Committee (MPC) for 2024 on Friday.
The MPC members with a majority of 4:2 decided to keep the repo rate unchanged and keep the ‘Neutral’ stance.
Governor said the Standing Deposit Facility (SDF) rate remains at 6.25% and the Marginal Standing Facility (MSF) rate and the Bank Rate at 6.75%.
The decision came amid high inflation and weak GDP growth numbers.
This has been the eleventh straight meeting since the MPC has kept the rate unchanged.
During the last MPC meet, RBI has kept the repo rate unchanged at 6.5% while changing the policy stance to ‘Neutral’ from ‘Withdrawal of Accommodation’.
Governor has announced that the RBI has also cut the Cash Reserve Ratio (CRR) by 50 basis points to 4%.
He said the CRR to lead to the infusion of Rs 1.16 trillion into the system.
Experts believed that CRR cut could have a significant impact by injecting much-needed liquidity into the banking system.
Inflation forecast:
Governor Das said the high inflation is to cool down on seasonal harvest, and to only begin easing in Jan-Mar.
For the Financial Year 2025, the Governor said the CPI to be at 4.8%. For Q3 of FY25, it is projected at 5.7 ; while for the Q4, it is 4.5 .
Further, for the Q1 of FY26, the CPI is projected at 4.6% while at 4% for the Q2 .
On the recent spike in inflation, Governor said it highlights the continuing risks of multiple and overlapping shocks to the inflation outlook and expectations.
The Governor said that going forward, food inflation is likely to soften in Q4 with seasonal easing of vegetables prices and kharif harvest arrivals; and good soil moisture conditions along with comfortable reservoir levels auguring well for rabi production.
GDP projection:
For the Financial Year 2025, RBI cuts the GDP growth projection to 6.6% from 7.2%.
The Real GDP growth for Q3 is projected at 6.8%, while 7.2% for Q4 of the fiscal.
The MPC noted that the near-term inflation and growth outcomes in India have turned somewhat adverse since the October policy. Going forward, however, economic activity is set to improve along with rising business and consumer sentiments, as reflected in the Reserve Bank’s surveys.
