The Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) commenced its latest meeting on June 5, 2024. The RBI Governor Shaktikanta Das announced the decisions made during the meeting. He revealed that the committee members unanimously decided to keep the repo rate unchanged at 6.5%. The decision was made with a 4:2 majority vote, maintaining the status quo on the repo rate at 6.5%. The committee also reiterated its stance on the ‘withdrawal of accommodation.’
Key Interest Rates Remain Steady
In addition to the repo rate, other key rates remain stable. The reverse repo rate is held at 3.35%, the standing deposit facility rate at 6.25%, the marginal standing facility rate at 6.75%, and the bank rate also at 6.75%. Governor Das emphasized that the RBI remains committed to bringing inflation down to 4% on a sustainable basis, expressing concern over high food inflation. He stated that the inflation-growth balance is favorably progressing.
Liquidity Operations and RBI Balance Sheet
Governor Das highlighted the stability of the Indian rupee, attributing it to the robust and resilient economic foundation of the country. He assured that liquidity operations would remain agile and responsive. Regarding the RBI’s balance sheet, Das reported an increase in the risk buffer to 6.5%, up by 0.5% for the fiscal year 2024, leading to further improvements. The RBI also announced a dividend of ₹2.1 lakh crore to the government.
Policy Changes and Digital Initiatives
In a move to enhance the banking sector, the RBI has increased the bulk deposit limit for banks from ₹2 crore to ₹3 crore. Governor Das announced the development of a digital payment intelligence platform to mitigate digital fraud.
Foreign Exchange Management Act Amendments
The RBI proposed rationalizing guidelines under the Foreign Exchange Management Act related to the export and import of goods and services. Governor Das stated that foreign direct investment (FDI) remains strong, although net FDI saw a decline in fiscal 2024.
The MPC’s latest decisions reflect a careful balance of maintaining economic stability and addressing inflationary concerns, while fostering conditions for sustained economic growth.
Besides these, it has already been revealed that the RBI expects retail inflation to be 4.9% in the first quarter of the fiscal year 2025, 3.8% in the second quarter, 4.6% in the third quarter, and 4.5% in the fourth quarter. Assuming a normal monsoon, inflation is projected to average 4.5% for the current fiscal year. Governor Das mentioned that retail inflation might improve in the second quarter of the current fiscal year, stressing the need for close monitoring of food price inflation.
During the previous MPC meeting, the GDP growth estimate for the fiscal year 2025 was set at 7%. The latest meeting revised this estimate upwards to 7.2%. Governor Das noted that if the GDP growth reaches 7.2% this fiscal year, it would mark the fourth consecutive year with growth above 7%.
The RBI forecasts GDP growth for the first quarter of fiscal 2025 at 7.3%, 7.2% in the second quarter, 7.3% in the third quarter, and 7.2% in the fourth quarter.
