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Informist, Friday, Dec. 6, 2024

MUMBAI – Following are edited excerpts of the top 10 announcements made by Reserve Bank of India Governor Shaktikanta Das on Friday after the Monetary Policy Committee meeting:

POLICY RATES

The Reserve Bank of India's Monetary Policy Committee voted by four votes to two to leave the policy repo rate unchanged at 6.50%. Consequently, the standing deposit facility rate remains at 6.25% and the marginal standing facility rate and the Bank Rate at 6.75%.

MPC STANCE

The MPC decided unanimously to continue with the 'neutral' stance and to remain unambiguously focused on a durable alignment of inflation with the target, while supporting growth.

CRR CUT

To ease the potential liquidity stress, the central bank has decided to reduce the cash reserve ratio of banks by 50 basis points to 4.0% of net demand and time liabilities in two equal tranches of 25 basis points each with effect from the fortnight beginning Dec. 14 and Dec. 28. The reduction in the CRR is consistent with the neutral policy stance and would release primary liquidity of about INR 1.16 trillion to the banking system.

GROWTH

The GDP growth forecast for 2024-25 has been cut to 6.6% from 7.2% earlier, with growth at 6.8% in Oct-Dec and at  7.2% in Jan-Mar. In the next financial year, GDP growth for Apr-Jun is projected at 6.9% and Jul-Sept at 7.3%. The risks are evenly balanced.

INFLATION

CPI inflation for 2024-25 has been revised up to 4.8% from 4.5% earlier, with inflation in Oct-Dec at 5.7% against 4.8% earlier and Jan-Mar at 4.5% against 4.2%. The inflation in Apr-Jun 2025 is projected at 4.6% and Jul-Sept at 4.0%, with risks evenly balanced.

FCNR(B) ACCOUNTS

To attract more capital inflows, the Reserve Bank of India raised the interest rate ceilings on Foreign Currency Non-Resident Accounts (Banks) deposits from 1 year to five years by 150 basis points. Banks are allowed to raise fresh FCNR(B) deposits between 1 year and less than 3 years at rates not exceeding the overnight alternative reference rate plus 400 bps compared with 250 bps earlier. For deposits of 3 to 5 years, the ceiling has been increased to the overnight alternative reference rate plus 500 bps from 350 bps earlier. This relaxation in FCNR(B) deposit rates will be available till Mar. 31.

FX-RETAIL PLATFORM

The RBI plans to link the FX-Retail platform with the National Payments Corp. of India's Bharat Connect platform. This integration will enable users to transact on the FX-Retail platform through mobile apps of banks and non-bank payment system providers, expanding its reach and enhancing user experience. 

COLLATERAL-FREE AGRICULTURE LOAN

To address rising agricultural input costs and inflation, the RBI has decided to increase the limit for collateral-free agricultural loans from INR 160,000 to INR 200,000 per borrower. The revision will enhance credit availability for small and marginal farmers.

PRE-SANCTIONED CREDIT LINES THROUGH UPI

The RBI has decided to permit small finance banks to extend pre-sanctioned credit lines through the Unified Payments Interface. The move will deepen financial inclusion and enhance formal credit, particularly for 'new to credit' customers.

SECURED OVERNIGHT RUPEE RATE

With a view to developing the interest rate derivatives market and improving the credibility of interest rate benchmarks, the Reserve Bank proposes to introduce a new benchmark - the Secured Overnight Rupee Rate - based on all secured money market transactions – overnight market repo as well as TREPS.  End

Compiled by Vaishali Tyagi

Edited by Saji George Titus

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