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Informist, Friday, Jun. 6, 2025

 

MUMBAI - Following are the highlights of Reserve Bank of India Governor Sanjay Malhotra's statement on Friday after the second bi-monthly meeting of the Monetary Policy Committee for 2025-26 (Apr-Mar):
 

KEY TAKEAWAYS

* MPC voted to cut repo rate by 50 bps
* MPC voted to cut repo rate to 5.50%
* SDF rate adjusted to 5.25%
* MSF and Bank rate adjusted to 5.75%

* CRR cut by 100 bps of NDTL

* MPC felt frontloading rate cuts appropriate
* Felt front-loading rate cuts will support growth

* MPC left with very limited space to support growth

* MPC member Bhattacharya voted for 25 bps repo rate cut

* Policy stance changed to 'neutral' from 'accommodative'

* Minutes of Jun MPC meeting to be released on Jun 20
* Next MPC meeting to be held on Aug 4-6

INFLATION

* FY26 CPI inflation seen at 3.7%
* Cuts FY26 CPI inflation forecast to 3.7% from 4.0?rlier
* Cuts Apr-Jun CPI inflation forecast to 2.9% from 3.6?rlier
* Cuts Jul-Sept CPI inflation forecast to 3.4% from 3.9?rlier

* Hikes Oct-Dec CPI inflation forecast to 3.9% from 3.8?rlier
* Retains Jan-Mar 2026 CPI inflation forecast at 4.4%
* Risks to inflation forecasts are evenly balanced
* Inflation softened significantly in last few mos
* Signs of broad-based disinflation
* Signs of broad-based moderation in inflation
* CPI likely to undershoot the 4% target at the margin
* Near-term, medium-term inflation outlook gives confidence
* Food inflation outlook remains soft
* Core inflation expected to remain benign
* Core CPI also seen moderate due to benign commodity prices

* Core CPI largely steady, contained despite gold price rise
* Inflation expectations, especially rural, coming down
* Price stability key for equitable growth
* Price stability not sufficient to ensure growth
* Supportive policy environment vital amid high uncertainty

GROWTH

* Retains FY26 GDP growth forecast at 6.5%
* Retains Apr-Jun GDP growth forecast at 6.5%
* Retains Jul-Sept GDP growth forecast at 6.7%
* Retains Oct-Dec GDP growth forecast at 6.6%
* Retains Jan-Mar GDP growth forecast at 6.3%

* Risks to growth forecasts are evenly balanced
* We are already growing at a faster pace, aspire to grow more
* We aspire to grow at a higher rate
* Growth remains lower than aspiration
* Imperative to provide policy stimulus

* Growth needs policy support amid global uncertainty
* Price stability necessary, not sufficient, condition for growth
* Not averse to monetary, credit policies to support growth
* Spillover from protracted geopolitical tensions pose risk to growth

* Policy actions should be seen as step towards boosting growth
* Important to focus on domestic growth amid global uncertainty
* Global environment remains uncertain
* No tussle between price stability, growth in medium-term
* No tussle between price stability, growth in long-term
* Global econ uncertain, more important to focus on local growth
 

FINANCIAL SECTOR

* CRR to be cut by 100 bps to 3.00% of NDTL
* To cut CRR in four tranches of 25 bps each
* CRR cut to release INR 2.5 tln of liquidity by end-Nov

* CRR cuts effective from fortnight starting Sept 6, Oct 4, Nov 1, Nov 29 
* CRR cut to be carried out in four equal tranches of 25 bps each 
* CRR cut to reduce cost of funding for banks

* CRR cut to accelerate monetary policy transmission
* Surplus banking liquidity reinforced repo rate cut transmission
* Total of INR 9.5 tln durable liquidity injected since Jan
* Weighted avg call rate at lower end of LAF corridor since Apr
* Yet to see perceptible transmission of rate cut to credit mkt
* Committed to provide sufficient liquidity to banking system
* Will continue to monitor evolving liquidity conditions
* Will take proctive measures on liquidity as needed
* System level stability indicators of banks remain stable
* CD ratio of banks was 81.84% at Dec end
* System level parameters of NBFCs sound
* Stress seen earlier in retail segment loans has abated
* Stress in unsecured personal loan segment has abated
* Stress seen in credit cards segment has abated
* Bks, NBFCs taking steps to reduce risks from microfinance

 

MACROECONOMY

* FY26 econ activity resilient
* Indian econ picture of strength, stability, opportunity
* Indian econ robust on strong balance sheet
* Indian econ offers immense opportunities to investors

* India econ progressing well on inflation, growth
* Econ gives immense opportunities to local, foreign investors

* Demography, digitalisation, domestic demand give opportunities

* Global backdrop remains fragile, highly fluid

* MPC meet held in backdrop of early monsoon
* Global econ outlook uncertainty has ebbed since Apr policy
* Last mile of global disinflation more protracted
* Global growth, trade projections cut by multilateral agencies
* Growing econ, fincl fragmentation reshaping global econ

* Emerging econ central bks have tough task to prevent spillovers
* Growing frontier of AI raising concerns

* We are making all efforts to meet Viksit Bharat aim

* Industrial activity recovering gradually, though uneven
* Agri sectors remains strong

* Highest procurement of wheat in 4 years provides comfort
* Pvt consumption remains healthy
* Gradual rise in discretionary spending
* Rural demand remains steady, invest activity reviving
* Rural demand steady, urban demand improving

* Above normal southwest monsoon to aid agri sector, rural demand
* Govt thrust on capex should help revive invest activity

* Wheat, pulses rabi production should secure enough supply
* Likely above normal monsoon augurs well for kharif crop prospect
* Normal monsoon augurs well for agricultural output
* Need to remain watchful of weather-related uncertainties
* Investment activity is reviving
* Non oil, non gold import reflect bouyant domestic demand
* Non-oil, non-gold imports grew in double digits
* Services exports continue on a very strong growth trajectory
* Services activity should buoy urban demand

 

EXTERNAL SECTOR

* CAD for FY25 to remain low

* CAD for FY26 to remain well within sustainable levels

* Trade policy uncertainty weighs on merchandise exports
* Conclusion of FTAs with US, others should provide relief
* Need to be watchful of still evolving tariff development
* India's merchandise trade remains robust
* Net svcs, remittance receipts likely in surplus going ahead
* Net svcs, remittances to counterbalance goods trade deficit
* Net FDI important for FX reserves
* Gross FDI the more important number than net FDI
* For investment, gross FDI is important
* Gross FDI invest increased sharply in FY25
* India continues to be attractive invest destination
* Rise in repatriation of FDI a sign of a maturing market

* Overall high gross FDI shows India attractive invest destination
* May 30 FX reserves $691.5 bln
* Overall India's external sector remains resilient
* India's forex reserves enough to fund 11 months of imports
* FX reserves at 11 months' import cover, 96% of external debt
* Remain confident of meeting external financing needs
 

End

US$1 = INR 85.82

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

 

Compiled by Vinod Bhovad

Filed by Vandana Hingorani

 

 

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