RBI Monetary Policy Highlights: Shaktikanta Das-led MPC keeps repo rate unchanged at 6.5%; GDP growth seen at 7%, your EMIs won’t come down right now

"Our policy decisions are primarily guided by domestic factors," says RBI governor Shaktikanta Das.

“The elephant moves at a slow pace. The last mile of inflation is sticky,” RBI governor Shaktikanta Das said.

While acknowledging that inflation has come down RBI governor Shaktikanta Das stressed that the task is not yet over when it comes to inflation.

“I will not be off the mark when I say that the policy was on expected lines,” says RBI governor Shaktikanta Das.

The Reserve Bank of India Montary Policy Committee meeting has estimated real growth rate for financial year 2024-25 at 7 per cent.

RBI Governor Shaktikanata Das, while announcing the outcome of the MPC on Friday, said that growth in first quarter of FY25 is projected at 7.1 per cent, followed by 6.9 per cent in second quarter and 7 per cent each in both third and fourth quarters.

"Since the last policy, the growth inflation dynamics has played out favourably. Growth has continued its momentum surpassing all expectations. Headline inflation has eased to 5.1 per cent during both January and February," Das said.

He said that global economy has remained resilient with a stable outlook reflected in various high quality indicators.

"Credible consolidation plans particularly in major advanced economies focussing on growth advancing investments would be necessary to address this challenge...India presents a different picture on account of its fiscal consolidation and faster GDP growth," Das said.

The RBI Governor also said that the advance estimates for 2023-24 placed the real GDP growth at 7.6 per cent, which is the third successive year of 7 per cent or higher growth.

"Turning to domestic growth, domestic economic activity continues to expand at an accelerated pace, supported by fixed investment and an improving global environment," Das said.

"The second advance estimates placed the real GDP growth at 7.6 per cent for 2023-24, the third successive year of 7 per cent or higher growth," he added.

The Reserve Bank on Friday announced the launch of a mobile app to enable retail investors to participate in government securities (G-Secs) or government bonds market.

RBI Retail Direct Scheme, launched in November 2021, gives access to individual investors to maintain gilt accounts with the RBI and invest in government securities.

The Scheme enables investors to buy securities in primary auctions as well as buy/sell securities through the Negotiated Dealing System - Order Matching system (NDS-OM) platform.

"To further improve ease of access, a mobile application of the Retail Direct portal is being developed. The app will enable investors to buy and sell instruments on the go, at their convenience. The app will be available for use shortly," RBI Governor Shaktikanta Das said, while announcing the first bi-monthly monetary policy for the current fiscal.

The government is planning for gross market borrowing of Rs 14.13 lakh crore for 2024-25. Out of this Rs 7.5 lakh crore, or 53 per cent, is scheduled to be borrowed in the first half (H1).

Here is a timeline of changes to India's repo rate since June 2000.

*Rate (%) effective date

6.50 05-04-2024

6.50 08-02-2024

6.50 08-12-2023

6.50 06-10-2023

6.50 08-06-2023

6.50 06-04-2023

6.50 08-02-2023

6.25 07-12-2022

5.90 30-09-2022

5.40 05-08-2022

4.90 08-06-2022

4.40 04-05-2022

4.00 22-05-2020

4.40 27-03-2020

5.15 06-02-2020

5.15 05-12-2019

5.15 04-10-2019

5.40 07-08-2019

5.75 06-06-2019

6.00 04-04-2019

6.25 07-02-2019

6.50 01-08-2018

6.25 06-06-2018

6.00 02-08-2017

6.25 04-10-2016

6.50 05-04-2016

6.75 29-09-2015

7.25 02-06-2015

7.50 04-03-2015

7.75 15-01-2015

8.00 28-01-2014

7.75 29-10-2013

7.50 20-09-2013

7.25 03-05-2013

7.50 19-03-2013

7.75 29-01-2013

8.00 17-04-2012

8.50 25-10-2011

8.25 16-09-2011

8.00 26-07-2011

7.50 16-06-2011

7.25 03-05-2011

6.75 17-03-2011

6.50 25-01-2011

6.25 02-11-2010

6.00 16-09-2010

5.75 27-07-2010

5.50 02-07-2010

5.25 20-04-2010

5.00 19-03-2010

4.75 21-04-2009

5.00 04-03-2009

5.50 02-01-2009

6.50 08-12-2008

7.50 03-11-2008

8.00 20-10-2008

9.00 29-07-2008

8.50 24-06-2008

8.00 11-06-2008

7.75 30-03-2007

7.50 31-01-2007

7.25 30-10-2006

7.00 25-07-2006

6.75 08-06-2006

6.50 24-01-2006

6.25 26-10-2005

6.00 31-03-2004

7.00 19-03-2003

7.10 07-03-2003

7.50 12-11-2002

8.00 28-03-2002

8.50 07-06-2001

8.75 30-04-2001

9.00 09-03-2001

10.00 06-11-2000

10.25 13-10-2000

13.50 06-09-2000

15.00 30-08-2000

16.00 09-08-2000

10.00 21-07-2000

9.00 13-07-2000

12.25 28-06-2000

12.60 27-06-2000

13.05 23-06-2000

13.00 22-06-2000

13.50 21-06-2000

14.00 20-06-2000

13.50 19-06-2000

10.85 14-06-2000

9.55 13-06-2000

9.25 12-06-2000

9.05 09-06-2000

9.00 07-06-2000

9.05 05-06-2000

* Note: Prior to Oct. 29, 2004, the repo rate was known as the reverse repo rate

RBI Governor Shaktikanta Das said, "Next announcement relates to enabling UPI for cash deposit facility. Deposit of cash through Cash Deposit Machines, that is CDMs, is primarily being done through the use of debit cards. Given the experience gained from cardless cash withdrawal using UPI at the ATMs, it is now proposed to absorb. It is now proposed to facilitate the deposit of cash in CDMs using UPI. This measure will further enhance customer convenience and make the currency-handling process at banks more efficient..."

The Reserve Bank retained inflation projection at 4.5 per cent for the current financial year, lower than 5.4 per cent in the last fiscal.

Assuming a normal monsoon this year, CPI (consumer price index-based) inflation for the current year is projected at 4.5 per cent, with Q1 at 4.9 per cent, Q2 at 3.8 per cent, Q3 at 4.6 per cent, and Q4 at 4.5 per cent.

Reserve Bank Governor Shaktikanta Das also stressed on the need to remain vigilant on food prices, given the forecast of higher temperatures between April-June.

He also said that the impact of reduction in fuel prices on inflation will deepen in the coming months.

“As was expected the RBI governor kept the repo rates steady, even though the core inflation has softened because the trends of inflation do not appear to be disinflationary entirely. Anchoring inflation expectations is one of the key objectives of inflation management and the measure taken by the governor is in the right direction.,” says Vivek Iyer, Partner, Grant Thornton Bharat.

“In its latest monetary policy decision, the Reserve Bank of India (RBI) opted for a cautious approach, maintaining the status quo on both policy rates and liquidity stance, despite the moderating core inflation. The decision underscores the central bank's vigilance over headline inflation, which remains above the Monetary Policy Committee's (MPC) target, amidst strong growth dynamics in India. This careful stance reflects concerns over potential inflationary pressures arising from volatile food prices, recent upticks in oil prices, and robust economic growth. While there was some anticipation of rate cuts by the end of 2024, the RBI seems inclined to adopt a wait-and-see approach before initiating a rate cut cycle. The central bank's current neutral policy stance appears designed to mitigate risks without unduly unsettling the debt and equity markets. This strategy highlights the RBI's priority to balance growth with inflation control, acknowledging the significant weight of volatile food components in India's retail inflation basket and the potential impact of global oil price fluctuations,” says Sujan Hajra, Chief Economist & Executive Director, Anand Rathi Shares and Stock Brokers.

“As expected, the Reserve Bank of India (RBI) has maintained its focus on monetary stability by keeping the repo rate unchanged at 6.5% for the seventh consecutive time. This move aims to keep inflation in check within the targeted range while sustaining market momentum. The central bank's strategy reflects careful consideration of robust economic indicators, amidst factors such as monsoon performance, US federal decisions, and overall economic growth, ensuring continued high growth prospects for the country.”

“The expectation now is for rates to potentially adjust towards the end of this year when inflation moderates and the food inflation remains within expected parameters. This cautious approach by the RBI indicates a deliberate assessment of the impacts of previous rate actions and economic data before contemplating further adjustments.”

“This decision also has implications for banks and financial institutions, particularly concerning lending rates like home loan interest rates, which are linked to the RBI’s repo rate. A stable repo rate signals consistency in interest rates for borrowers, providing assurance to homebuyers regarding steady loan interest rates, beneficial for both new loans and existing ones with floating rates. Stable interest rates not only enhance affordability for potential homebuyers but also foster consumer confidence, thereby sustaining demand in the real estate market. “

“Additionally, fixed deposit (FD) interest rates, influenced by factors like the RBI’s policies such as the repo rate, are likely to remain stable when the repo rate is unchanged. This stability benefits FD investors, especially those seeking predictable income streams, such as retirees and conservative investors prioritizing capital preservation and regular earnings,” says Adhil Shetty, CEO, Bankbazaar.com.

India's forex reserves has reached all-time high of $645.6 billion as of March 29, informed RBI Governor Shaktikanta Das.

According to Reserve Bank of India (RBI) Governor Shaktikanta Das, the rupee has maintained a relatively stable trajectory compared to other emerging market currencies, demonstrating the lowest volatility throughout 2023. Governor Das also underscored ongoing efforts aimed at sustaining economic equilibrium focusing on RBI's commitment to fostering price stability over the long term.

RBI started the rate hike cycle in May 2022. Since then inflation has come down. RBI governor Shaktikanta Das today said that inflation was the elephant in the room. Now the elephant has left the room and it appears to be on its way to the forest. We would like the elephant to go to the forest and stay there, Das said.

The six-member rate-setting panel by a majority vote of 5:1 favoured the status quo on interest rate, while maintaining focus on withdrawal of accommodative stance.

India continues to be the receiver of the largest remittances in the world and the cost of receiving remittances is also coming down, says RBI governor Shaktikanta Das.

Stock market today: Post the RBI policy meet, in which the repo rate was kept unchanged at 6.5%, the Indian stock market indices BSE Sensex and Nifty50 pared early losses. At 10:23 AM, BSE Sensex was trading at 74,137.09, down 90 points or 0.12%. Nifty50 was at 22,491.70, down 23 points or 0.10%.

RBI Guv Shaktikanta Das said, "Global growth remains resilient; a recent uptick in crude oil prices needs to be closely monitored."

Assuming a normal monsoon, the RBI has projected that CPI inflation for FY 2024-25 will be at 4.5%. On a quarterly basis, CPI inflation is expected to be 4.9% in Q1, 3.8% in Q2, 4.6% in Q3, and 4.5% in Q4. The risks are evenly balanced.

The Reserve Bank of India in its MPC meet projected the GDP growth for 2024-25 at 7% for the Indian economy. Quarterly break-up is projected at 7.1% in Q1, 6.9% in Q2 and 7% in Q3 and Q4. The risks are evenly balanced.

The outlook for agriculture and rural activity remains bright. South-west monsoon is expected to be normal. Rural demand, better employment conditions, moderating inflation, manufacturing and services growth should help boost private consumption, says RBI governor Shaktikanta Das.

Services PMI has remained above 60 in February and March suggesting sustained, healthy expansion. Urban consumption has remained buoyant. The resilience in cement production, import of capital goods, steel consumption augur well for investment cycle, says RBI governor Shaktikanta Das.

The central banking authority of India has kept the repo rate unchanged for the last six consecutive MPC meetings and this time too, it has maintain the status quo on interest rates. The repo rate, is the interest rate at which banks draw funds from RBI to overcome short-term liquidity mismatches.

India presents a different picture on account of its fiscal consolation and robust GDP growth when compared to the debt situation in major economies, says RBI governor Shaktikanta Das.

Debt to GDP ratio that rose during the pandemic, is expected to remain elevated. Worsening debt situation in the advanced economies can pose challenges for emerging market economies, says RBI governor Shaktikanta Das.

Global trade is expected to grow faster in 2024, although weaker than historical trends, says RBI governor Shaktikanta Das.

Global economy has remained resilient with a stable outlook as suggested by indicators, says RBI governor Shaktikanta Das

Robust growth prospects allow the MPC enough room to focus on inflation and allow it to move towards the target of 4%. Monetary policy must continue to be actively disinflationary, Shaktikanta Das said.

After a detailed assessment, RBI MPC decided by a majority of 5-1 to keep the repo rate unchanged at 6.5%.

RBI governor Shaktikanta Das started his address by stating that the RBI has many more functions compared to other central banks across the world. RBI is well positioned to take the best steps for the Indian economy, he said.

RBI governor Shaktikanta Das started his address by talking about RBI commemorating 90 years earlier this week. He said that RBI was always at the forefront for steering India’s economy towards stability.

The Reserve Bank of India has the important target of maintaining inflation at around 4% plus-minus 2%. This needs to be done without affecting GDP growth prospects too much. India’s GDP grew at a robust 8.4% in the third quarter of FY 2023-24. This gives RBI enough confidence that a repo rate cut is not required at this juncture. Also, while CPI inflation is trending down, global uncertainties and domestic risks in terms of weather shocks, may prevent Shaktikanta Das-led MPC from opting for a repo rate cut today.

RBI’s Monetary Policy statement is much looked forward to, not only for any possible changes in key rates such as repo rate, but also for the central bank MPC’s commentary on the state of the Indian economy. RBI’s GDP growth outlook, inflation projections and its assessment of the domestic and global economy are important indicators for government policy makers, industry and analysts.

According to EY Economy Watch edition for March, available high frequency indicators show a strong and ongoing growth momentum. Headline manufacturing PMI increased to a five-month high of 56.9 in February 2024. Services PMI at 60.6, indicated a softer but sharp rate of expansion during the month. Gross GST collections remained high at Rs 1.68 lakh crore in February 2024, although slightly lower than RS 1.72 lakh crore in January 2024.

“The GDP growth forecast for India seems to be in a positive direction as per the IMF forecasts. The CPI inflation number as of February 2024 also happens to be at 5.09 % which is within the RBI inflation range of 2 % to 6%. However , the inflation rate is close to the upper range of 6 percent and the geopolitical uncertainties still weigh heavily on global growth through fragile supply chains. We also have the Indian elections around the corner. With this background, we expect the rbi to keep a neutral stance with no change in interest rates, as the RBI would like to see some more certainty with which the macro economic variables would move before taking a rate decision in either direction. We expect a rate cut only in the third quarter of this year, if at all the rate cut has to happen but not before that,” says Vivek Iyer, Partner, Grant Thornton Bharat.

“The Reserve Bank of India likely to keep the repo rate steady at 6.5%, without changing its approach. This move is meant to make sure the past rate increases of 250 basis points really work as intended. For people with home loans, this means things should stay the same for now, making it easier to manage their loans without worrying about sudden hikes. The RBI wants to ensure that the big changes in rates already made are properly felt in the economy. This could help keep the home loan sector stable and make planning easier for borrowers,” says Atul Monga, CEO and Co-Founder, Basic Home loan.

Stock market today: Ahead of the RBI’s Monetary Policy meeting, BSE Sensex and Nifty50 opened in red on Friday. While BSE Sensex dipped 200 points, Nifty50 was down to levels of 22,450.

RBI Monetary Policy Meeting latest update: This marks the first bi-monthly monetary policy session of the fiscal year 2024-25. The Reserve Bank of India had raised the repo rate to 6.5 percent in February 2023, maintaining it at this level throughout its last six bi-monthly meetings.

Indian economy saw its GDP grow at a robust 8.4 percent in the December quarter of the preceding fiscal year. The National Statistical Office (NSO) has adjusted the GDP estimates for the initial and second quarters of this fiscal to 8.2 and 8.1 percent, respectively, up from 7.8 percent and 7.6 percent.

Indian equity benchmark indices, currently at record levels, are poised to open with minimal change on Friday, ahead of the Reserve Bank of India's monetary policy announcement, where the central bank is anticipated to maintain the repo rate for the seventh consecutive meeting. The GIFT Nifty of India stood at 22,534 as of 8:03 a.m. IST, suggesting that the NSE Nifty 50 will commence trading close to Thursday's closing figure of 22,514.65.

As per a Reuters survey of economists, the RBI is likely to keep interest rates unchanged at its monetary policy meeting later in the day.

The Monetary Policy Committee or the MPC is a 6 member committee that is led by the RBI governor. At present the central bank governor is Shaktikanta Das. Other members of the RBI governor-headed MPC are Shashanka Bhide, Ashima Goyal, Jayanth R Varma, Rajiv Ranjan, and Michael Debabrata Patra.

The CPI (Consumer Price Index) inflation numbers for the month of February stood at 5.1%. This is within the RBI’s target band of 2-6% inflation that has been set for it by the government. However, with good GDP growth data indicating that the Indian economy is on a strong footing, RBI has little reason to begin the rate cut cycle, especially with global economic uncertainties adding to volatility in inflation data.

Vivek Singhal, CEO of Smartworld Developers, believes that an interest rate reduction in the upcoming RBI meeting would benefit India's real estate market. A rate cut could decrease borrowing expenses, boost demand, and enhance investor trust. Singhal has said that such an action from the RBI MPC could prompt a surge in growth and rejuvenation within the sector. With consumers seeking stability and security in their investments, a lower interest rate environment would significantly improve homebuyer sentiment and increase affordability, which is crucial in the housing market.

Experts suggest that the Monetary Policy Committee (MPC) might consider actions taken by central banks of major economies like the US and the UK, which are currently observing the situation before making any decisions on interest rates. Switzerland recently reduced interest rates, becoming the first major economy to do so, while Japan, the world's third-largest economy, ended its eight-year period of negative interest rates. According to a research report by the State Bank of India (SBI), it is believed that the monetary policy stance should continue to focus on withdrawing accommodation.

Indian stock market closed in green on Thursday after the Nifty surged 80 points to close at 22514 and Sensex also gained 350 points to close at 74227. During the Thursday's trading session, benchmark equity indices experienced volatility following a surge to new all-time highs, as profit-taking activities emerged. In the Nifty 50 list 31 shares closed in green while 19 closed in red. With the Monetary Policy result due today, the market can react after the announcement of results.

In its February 2024 monetary policy review, the RBI retained the repo rate at 6.5% for sixth consecutive time. Alongside, the monetary policy stance was also maintained as withdrawal of liquidity from the system.

The RBI, projected CPI inflation to average 5.0% in 4QFY24 thereby implying the annual inflation to average 5.4% in FY24. The RBI projects CPI inflation to ease to 4.5% in FY25. In its assessment, CPI inflation outlook is expected to be largely shaped by the evolving food inflation outlook. However, sustained volatility in crude oil prices and international financial and commodity markets may pose upside risks, notes EY in its March edition of Economy Watch.

RBI Monetary Policy announcements today will decide if your loan EMI will come down any time soon or not. Every time the RBI cuts repo rate, borrowing becomes less expensive for banks, and this rate cut in turn is transferred to borrowers in the form of lower interest rates for loans.

“The Federal Reserve’s dovish commentary. Rate-cut expectations in the US have been significantly re-priced, with the consensus moving from six cuts to three in CY24. The sticky inflation in the initial months and the strong growth led the Fed to raise its expectations of growth and inflation. Further, BIS estimates the natural rate of interest being higher, post-pandemic, which implies that the policy is not as restrictive as previously thought (affirmed by financial conditions indices, suggesting easiness). Hence, though little economic logic, the backdrop of presidential elections may make the Fed hesitant to cut rates toward the year-end, with a 50/50 chance of June cuts. Besides, parts of Europe have already or are about to enter an easing cycle. This has pushed DXY higher, which would be a negative for the rupee. FY24 GDP likely above 8%. Q3 saw GDP growing a robust 8.4% on strength in fixed investments and discrepancies, and a downward revision in last year’s revised estimates. Further, the CSO projected 7.6% growth for the entire fiscal, implying ~6% growth in Q4. On the other hand, strong growth across high-frequency indicators suggests that growth is likely to be above 8% in Q4. This means current year estimates would be further raised to 8.1%. While this seems like an above-trend growth, it is unlikely to stimulate core inflation as much of this growth is being driven by investments. Core inflation bottoming; volatility in food stays. Data since Dec’23 suggest a meaningful easing of inflationary pressure, which fell from 5.7% then to 5.1% in Jan/ Feb’24. The reason for optimism is continuous disinflation in the core CPI, now below the RBI’s 4% target. And, yet, we reckon the apex bank is unlikely to take comfort from this as it targets headline and not core CPI. Our food price index suggests that after bottoming in Jan’24, food prices are on an accelerating trajectory and, while official figures are not yet out, we see food inflation for Mar’24 being near 8%. DCA data suggest that, while more stable components of food are now declining, volatile components like fruit and vegetable prices are rising. This heightened volatility in food prices over the past few months has created uncertainty about the RBI’s outlook, preventing it from entering an easing cycle soon. Finally, there are reasons to believe that core inflation may bottom out in the near term as higher growth prospects for the US and China have pushed commodity prices higher. Liquidity conditions eased. Per our initial expectations, while the overall deficit holds, year-end government spendings have led to easing of interbank liquidity. This has brought the WALR near the repo rate as against the MSF, where it was at the end/beginning of last/current year. Ahead, we think the RBI would ensure the system stays in a deficit mode for seamless, complete transmission of rate hikes. Another status-quo policy. With the latest data on inflation and growth affirming our previous view, we reckon the RBI is unlikely to cut rates in CY24. We see strong growth continuing in FY25 (the RBI’s latest bulletin estimates 7.4% growth) and above-target inflation persisting,” says Sujan Hajra, Chief Economist & Executive Director, Anand Rathi Shares and Stock Brokers.