RBI Monetary Policy meeting highlights 2024

RBI Monetary Policy: On October 9, Reserve Bank of India Governor Shaktikanta Das announced that the monetary policy committee (MPC) has decided to maintain key policy rates unchanged for the tenth consecutive meeting. This choice was made in light of inflationary pressures, prompting a shift in policy stance from ‘accommodative’ to ‘neutral’, potentially signaling future rate cuts.

Das’ statement was made amidst expectations for interest rates to remain stable due to concerns about inflation and the potential impact of escalating tensions in the Middle East on commodity prices.

Since February 2023, the central bank has kept the repo rate steady at 6.5 percent, with experts suggesting that a possibility of easing may arise in December.

The government has tasked the central bank with ensuring that Consumer Price Index (CPI) based retail inflation remains at 4 percent, with a margin of 2 percent on either side.

RBI Monetary Policy meeting highlights

During an off-cycle meeting in May 2022, the MPC raised the policy rate by 40 basis points, followed by subsequent rate hikes of varying sizes until February 2023. Between May 2022 and February 2023, the repo rate increased cumulatively by 250 basis points.

Here’s the highlights from MPC:

1. The Monetary Policy Committee decided to shift to a neutral stance and maintain a clear focus on achieving sustainable inflation targets.
2. Food inflation pressures may ease later in FY25.
3. The RBI has projected real GDP growth at 7.2% YoY and CPI inflation at 4.5% YoY for FY25.
4. Progress in achieving durable inflation targets has been observed since August.
5. Optimism about inflation is contingent upon potential weather-related shocks.
6. Inflation has been managed within the tolerance band, but caution is needed before making any changes.
7. Banks and NBFCs are not allowed to impose foreclosure charges or penalties on loans to micro and small enterprises.
8. Credit market transmission has been satisfactory.
9. The UPI Lite wallet limit will rise from Rs 2,000 to Rs 5,000, while the single transaction limit for UPI 123Pay will increase from Rs 5,000 to Rs 10,000.
10. The RBI is closely monitoring data on credit cards, MFI loans, and unsecured loans.
11. Financial institutions should continue to focus on inoperative accounts, cybersecurity, and other relevant factors.
12. Some NBFCs have shown significant growth but may be expanding aggressively without strong underwriting practices.
13. Retail targets are driving growth in some NBFCs rather than actual demand.
14. NBFCs are encouraged to self-correct, with the RBI monitoring closely and ready to intervene if necessary.
15. FPI flows have shifted from outflows of $4.2 billion to inflows of $19.2 billion between June and October this year.
16. FDI flows remain robust, and India’s forex reserves have crossed the milestone of $700 billion.
17. The RBI will maintain flexibility in liquidity management operations.
18. September retail inflation is predicted to rise sharply as a result of increased food costs and an unfavorable base.
19. Money market rates, deposit rates, and lending rates are influenced by changes in policy rates.

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