India RBI Monetary Policy Repo Rate Today: As expected earlier the RBI kept the key repo rate unchanged at 6.5 per cent and maintained the policy stance as ‘neutral’ on Friday. This we the ninth time in a row that the RBI MPC has left the repo rate unchanged since February 2023. The RBI has also predicted a lower GDP growth of 6.6 % from the previous estimate of a 7.2% for current financial year 2024-25 and inflation at 4.8% from 4.5%.
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Delivering the bi-monthly monetary RBI policy statement today, Das said, “The MPC firmly subscribes to the view that only sustained price stability are the preconditions for later building the basis of sustainable high growth.” The MPC reaffirmed its determination to rebalance inflation growth in the overall interest of the economics.
India RBI Monetary Policy Repo Rate MPC December 2024: Republishment, cash reserve ratio, bank rate
Although the RBI policy MPC left the repo rate at 6.5 per cent unchanged it slashed the cash reserve ratio (CRR) by 0.5 percentage points to 4 per cent. It will unfreeze another Rs 1.16 lakh crore in the banking system which will be a big boon to the struggling lenders.
Basis point simply means the one hundredth of a percentage point. CRR is the proportion of a total quantity of deposits which a bank must hold in the form of cash with the RBI.
Besides this, reverse repo rate, bank rate, SDF and MSF are at 3.35 per cent, 6.75 per cent, 6.25 per cent and 6.75 per cent respectively.
Repo rate refers to the rate at which the RBI funds the commercial banks while, reverse repo rate refers to interest rate on the deposit made by the commercial banks to the RBI.
New fiscal RBI policy today India FY25 GDP growth is estimated at 6.6 percent versus 7.1 percent expected earlier
The RBI policy on Friday cut its growth estimate for the current fiscal ending March 31, 2024 to 6.6 per cent from 7.2 per cent estimated earlier. It follows recent second-quarter GDP growth which came in at a seven-quarter low of 5.4 percent.
Promising that the growth in real GDP in Q2 at 5.4 per cent was much lower than anticipated. As per Das this decline in the growth was mainly due to a steep slowdown in industrial growth,” Das said.
On the outlook, the RBI governor said high-frequency indicators available so far suggest that the slowdown in domestic economic activity bottomed out in Q2:in the financial year 2024-25, and has since than revoked with the help of good festive and increased rurally activities.
“While there has been an unexpected deviation from the path of showing the direction for the growth rate and inflation rate, the economy is still on the path to steady and balanced development,” Das said.
The RBI estimates that real GDP will grow at 6.6 %in 2024-25 with Q3 at 6.8 %; and Q4 at 7.2 %. Real GDP growth for Q1:for year 2024-25 at 7.1 percent for first quarter 2025-26 at 6.9 per cent; and for second quarter 2025-26 at 7.3 percent.
FY25 Inflation Projection Raise To 4.8%
The reactions to the inflation inclined RBI policy higher the inflation expectation of FY25 to 4.8 from previous 4.5 per cent.
‘The inflation rate rose rapidly in September and October 202421 the P1 being led by the adjusted inflation of food and non-alcoholic beverages… Nonetheless, sustained continued but at a slower pace, will keep headline inflation elevated in the third quarter,’ Das said in the policy statement.
The central bank expects that in the next fiscal by June 2024 CPI will reach 4.8 percent, in the third quarter will be 5.7 percent, and in the fourth quarter will be 4.5 percent. CPI inflation for Q1:Full fiscal year was at 3.2 percent; 2021-22 at 3.5 percent, 2022-23 at 4.2 percent, 2024-25 at 4.3 percent, 2025-26 at 4.6 percent and Q2 at 4.0 percent. This means that the risks have been equally distributed.
Additional Measures:
UPI: Small Finance Banks Allowed To Sanction Credit Lines
The RBI on Friday permitted small finance banks UPI lines of credit. Credit line on UPI was introduced in the September 2023 and was effective through the scheduled commercial banks(SCBs).
“It has now been decided to allow even small finance banks for extension of pre-sanctioned credit limits through the UPI. This shall go a long way to deepen financial inclusion and improve upon the formal credit for the ‘new to credit’ customers, said Das.
The limit of agriculture loan that does not require collateral has been increased to Rs 2 lakh.
In a big bonanza for farmers, the Reserve Bank of India on Friday increased the limit of collateral-free agriculture loans from Rs 1.6 lakh to Rs 2 lakh per borrower. The move will help improve credit outreach among Small and Marginal farmers.
Considering the rising trend of agricultural inputs and inflation, it has been considered fit to enhance the limit for collateral free agriculture loans from Rs 1,60,000/- to Rs 2,00,000/- per borrower. This will further improve the availability of credit to small and marginal farmers,” Das said.
To recall, the provision on the collateral-free agriculture loans was changed the last time in 2019.
FX-Retail Platform will be integrated with NPCI’s Bharat Connect Platform.
On Friday, the RBI also integrated FX-Retail platform with the Bharat Connect platform of NPCI.
It may be stated that the FX-Retail platform is relatively young – it has been operating since 2019.
“This would allow users make transactions on the FX-Retail via mobile applications of banks and other non-bank payment systems. This will also elongate the FX-Retail platform, improve user interfaces and enshrine fairness and transparency of pricing will adequate protection,” Shaktikanta Das stated.
RBI to come up with new tool in monetary management: New tool, Secured Overnight Rupee Rate
The RBI initiated the implementation of the new benchmark called Secured Overnight Rupee Rate (SORR) covering all secured money market transactions including overnight repo rate and treasury benchmark repo rate (TREPS).
Further improving the interest rate derivatives market and enhancing credibility of interest rate benchmarks is the purpose for implementing it, according to RBI governor.
Connect 2 Regulate
A new horizontal communication channel ‘Connect 2 Regulate’ was unveiled by the RBI on a new website section planned to be utilized by stakeholders to present their inputs and suggestions as well as responses to RBI particular topics.
RBI’s Podcast Facility
The Reserve Bank said it proposes expanding of ‘podcasts’ as part of its communication arsenal for broader dissemination of data.
RBI’s AI Platform
The RBI proposed to constitute an expert committee representing various fields to provide for FREE- AI or Framework for Responsible and Ethical Enablement of AI in financial industry.
The RBI has stated that the financial sector industry Structure is quickly getting transformed through the use of advanced technologies like the Artificial intelligence, tokenization, cloud computing among others.
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