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Informist, Friday, Dec. 6, 2024

 

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--RBI Das: Repo rate left unchanged at 6.50% 
--RBI Das: MPC voted by 4 votes to 2 to leave repo rate unchanged at 6.50% 
--RBI Das: MSF and Bank rates remain unchanged at 6.75%, SDF rate at 6.25% 
--RBI Das: MPC voted unanimously to maintain  neutral  policy stance 
--RBI Das: Neutral stance provides flexibility for apt action later 
--RBI cuts CRR by to 4.00% of NDTL in 2 equal tranches 
--RBI cuts CRR by 25 bps each of NDTL in fortnight starting Dec 14, Dec 28 
--RBI Policy: MPC members Kumar, Singh voted for 25 bps repo rate cut 
--RBI Policy: Minutes of Dec MPC meeting to be released on Dec 20

 

 

NEW DELHI - The Reserve Bank of India's Monetary Policy Committee Friday voted by four votes to two to leave the policy repo rate unchanged at 6.50%. The committee also retained the 'neutral' policy stance, having adopted it in October from 'withdrawal of accommodation'.

The RBI lowered the cash reserve ratio by 50 bps to 4.00% of net, demand and time liabilities in two equal tranches. The cash reserve ratio has been cut by 25 bps effective from the fortnight starting Dec. 14, and by another 25 bps from the fortnight starting Dec. 28.

 

The central bank lowered its GDP growth forecast for 2024-25 (Apr-Mar) by 60 basis points to 6.6%. The RBI raised its CPI inflation projection for FY25 to 4.8% from its earlier forecast of 4.5%.

 

The rate-setting panel's decision on the repo rate was in line with expectations. In an Informist poll, 20 of the 25 respondents expected the committee to leave the repo rate unchanged for the 11th meeting in a row. The committee had last changed the repo rate in February 2023.

 

External members Nagesh Kumar and Ram Singh dissented against the majority interest rate decision and voted for a 25 bps repo rate cut.

 

"The MPC believes that only with durable price stability can strong foundations be secured for high growth. The MPC remains committed to restoring the inflation growth balance in the overall interest of the economy," RBI Governor Shaktikanta Das said in his statement. "Accordingly, the MPC decided to keep the policy repo rate unchanged at 6.50 per cent in this meeting and continue with the neutral stance of monetary policy as it provides flexibility to monitor and assess the outlook on inflation and growth, and act appropriately."

 

Das said that the MPC adopted a prudent and cautious approach in this meeting to wait for "better visibility on the growth and inflation outlook". Since the October MPC meeting, inflation has risen sharply, while growth has moderated. 

 

On the RBI's decision to cut CRR, Das said that systemic liquidity may tighten in the coming months even as it remains adequate right now. "This reduction in the CRR is consistent with the neutral policy stance," Das said, adding that it would release primary liquidity of about INR 1.16 trillion to the banking system.

 

With the repo rate untouched, the Standing Deposit Facility rate stays at 6.25%, while the Marginal Standing Facility and Bank rates also remain unchanged at 6.75%.

 

The minutes of the MPC meeting will be published on Dec. 20. The next meeting of the MPC is scheduled for Feb 5-7, which would be the last one for FY25. 

 

This was the last scheduled MPC meeting for Das and RBI Deputy Governor Michael Patra. Das' term is scheduled to end on Dec. 10 with no communication from the government regarding an extension or a replacement. Patra's tenure ends in January.  End

 

Reported by Shubham Rana

Edited by Vandana Hingorani

 

 

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