The Reserve Bank of India-led Monetary Policy Committee (MPC) on Thursday decided to retain the repo rate at 6.5 per cent for the sixth time in a row.
With a majority of 5:1, the MPC decided to remain focused on withdrawal of accommodation, keeping the stance unchanged. “The MPC also decided to remain focused on withdrawal of accommodation to ensure that inflation progressively aligns to the target, while supporting growth,” RBI governor Shaktikanta Das said.
In addition, the central bank also left its inflation forecast for FY24 unchanged at 5.4 per cent, despite food price rise concerns and uncertainty around crude cost. On front, the MPC has forecast the Indian economy to grow at 7 per cent in FY25. The growth rate for Q1, Q2, Q3 and Q4 in FY25 were projected at 7.2 per cent, 6.8 per cent, 7 per cent and 6.9 per cent respectively.
SMS-based One Time Password (OTP).
Here’s what all the RBI MPC announced in it’s February meeting:
- Benchmark interest rate or repo rate kept unchanged at 6.5 per cent.
- GDP growth for 2024-25 (FY25) projected at 7 per cent, lower than 7.3 per cent this fiscal.
- Retail inflation to average 5.4 per cent this fiscal, to come down to 4.5 per cent in 2024-25.
- Investment cycle gaining steam, signs of revival in private sector capex
- Forex reserve at $622.5 billion; comfortable for meeting foreign obligations
- RBI stated lenders will have to provide key fact statements regarding loans to retail, MSME borrowers
- RBI has proposed to put in place a principle-based framework for authentication of transactions and adoption of alternative authentication mechanisms from SMS-based One Time Passwords (OTPs) for enhancing the security of digital payments.
- Domestic financial system remains resilient with a healthy balance sheet
- Regulated entities should accord highest priority to compliance, consumer interest protection
- RBI to introduce an offline functionality in CBDC-Retail for transactions in areas with poor or limited internet connectivity.
- Exchange rate of Indian rupee remained fairly stable in the current fiscal.
- Indian economy making confident progress on strong, sustained growth path.
- Rural demand continues to gather pace, urban consumption remains strong.
- Govt adhering to fiscal consolidation path; domestic economic activity strong.
- Uncertainty in food prices continue to impinge on headline inflation.
- Increasing geopolitical tension impacting supply chain, putting pressure on commodity prices.
- Monetary transmission by financial institutions still remains incomplete.
- Current economic momentum to sustain in the next fiscal.
- Recovery in rabi sowing, sustained profitability in manufacturing, resilience of services to support economic activity in 2024-25.
- Next monetary policy committee (MPC) meeting scheduled during April 3-5, 2024.