RBI's Monetary Policy Meeting: Repo Rate Unchanged, GDP Growth at 6.5%

The third bi-monthly monetary policy for FY24 was held today by the Reserve Bank of India Governor Shaktikanta Das. From August 8 to 10, the six members of the RBI's Monetary Policy Committee, Shaktikanta Das, Dr. Michael Debabrata Patra, Dr Mridul K. Saggar, and Prof. Jayanth R. met for three days. 

Shaktikanta Das has made a number of announcements regarding the macroeconomic forecast, UPI payments, liquidity, inflation outlook, and GDP projections for the central bank.  

Here is all that you need to know 

1. RBI kept the repo rate unchanged at 6.5% today. This is the third time in a row that the repo rate has been kept unchanged.
2. According to the RBI, the emphasis would be on ending the current accommodative policy stance to ensure that inflation gradually reaches the target level while promoting growth.
3. The GDP growth estimate for the coming fiscal year (FY) 24 has remained at 6.5%.
4. The RBI has slightly increased its prediction for inflation to 5.4%. The central bank claims that a surge in vegetable costs, driven by tomato prices, may impose significant upward pressure on the trajectory of short-term inflation.
5. For EMI-based floating interest loans, the RBI will take action to enhance greater transparency in the interest rate reset process. Borrowers will have the choice of converting to fixed-rate loans or having their debts foreclosed.
6. In other decisions, the RBI kept the standing deposit facility (SDF) rate, marginal standing facility (MSF) rate, and bank rate unchanged at 6.25%, 6.75%, and 6.75% respectively.
7. The RBI also allowed offline payments for UPI, with a limit of Rs 500 per transaction. This is a major step towards making UPI more accessible to users in rural areas. 
8. The Reserve Bank of India has instructed banks to maintain an incremental Cash Reserve Ratio (ICRR) of 10% on the rise in their deposits between May 19 and July 28 in order to absorb excess liquidity caused by a variety of circumstances, including the reintroduction of 2000-dollar notes to the banking system.
9. According to RBI Governor Shaktikanta Das, the cash reserve ratio (CRR) would stay at 4.5 percent. 
10.  RBI anticipates that the current account deficit will be eminently controllable in FY24.

Overall, the RBI's monetary policy meeting was a cautious one. The RBI is clearly concerned about rising inflation, but it is also mindful of the need to support economic growth. The next meeting will take place from October 4–6. 

— Harshita Kumar

Also read, how you can integrate UPI payments with conversations