RBI Monetary Policy Committee Decisions
The decisions on the Monetary Policy Committee (MPC) were shared by Shaktikanta Das, Governor of The Reserve Bank of India (RBI) on Friday, 7 June 2024. As usual, the Central Bank of India has unchanged the Repo Rate and remains focused on inflation amid policy uncertainty after the unexpected results of the Lok Sabha Elections 2024. As per the announcement during the second bi-monthly monetary policy of 2024-25, the MPC decided to keep the benchmark repo rate unchanged at 6.5%. It is worth noting that it is the 8th time that the repo rate has remained straightly unchanged by a 4:2 majority. RBI further decided to continue with its stance of “withdrawal of accommodation.”
India’s Central Bank raised its GDP growth prediction for fiscal year 2025 to 7.2% from 7% earlier. RBI keeps the FY25 inflation prediction at 4.5%. This is the RBI MPC’s third meeting of 2024 following the February Policy meeting, which took place from February 6–8, and its second meeting since the start of the new fiscal year, FY2025, on April 1. The Monetary Policy Committee invariably meets for three days before announcing its decision at the end of the three days. The third meeting of the RBI MPC will be on 6 August 2024. There will be four meetings in a year and two have been done and two are left.
In the last meeting, the Central Bank of India decided to keep the policy rate unchanged for the 7th consecutive time. The benchmark interest rate was last changed by the RBI in February 2023. Moreover, in the second meeting, RBI decided to integrate the UPI Lite with the e-mandate framework. This decision has been made to facilitate the auto-replenishment of UPI Lite balances. As the repo rate remains unchanged that means home loan interest rates and equated monthly instalments (EMIs) will also not change. Governor Shaktikanta Das said that RBI proposes to rationalise Foreign Exchange Management Act guidelines related to the export-import of goods and services.
The RBI’s decision to keep its focus on the withdrawal of accommodation is indicative of a well-balanced strategy to maintain economic growth and control inflation. According to Ajay Kumar Srivastava, Managing Director & CEO of Indian Overseas Bank, the RBI’s decision to extend e-mandates for recurring payments to fastags, auto-reload a wallet similar to UPI, and establish a digital payments intelligence platform is all set to promote a resilient banking sector.
Besides, in RBI MPC Meet 2024, the RBI announced a significant rise in Foreign Portfolio Investor (FPI) flows during the fiscal year of 202 with an inflow totalling $41.6 billion. “The outlook on crude oil prices remains uncertain due to geopolitical tensions. Assuming a normal monsoon, CPI inflation for 2024-25 is projected at 4.5% with Q1 at 4.9%, Q2 at 3.8%, Q3 at 4.6% and Q4 at 4.5%, the risks are evenly balanced. The GDP growth projection, we have increased from 7% to 7.2% and the inflation projection, the average for the year, we have retained it at 4.5% as it was in the last MPC meeting. I have explained there are good reasons why we have increased the GDP projection for the current year,” said the RBI Governor.
