RBI maintained the repo rate at 6.5%: Key highlights of the MPC

Following its meeting in December, the Monetary Policy Committee (MPC) of the Reserve Bank of India unanimously agreed to maintain the repo rate at 6.5%. Most of the MPC—five of the six members—maintained the policy of "withdrawal of accommodation."

India's economic resilience was emphasized by the central bank, notwithstanding the fragility of the global economic situation. For the current fiscal year (FY24), it kept its CPI estimate but increased its actual GDP predictions.  

RBI increased GDP Growth Projection

With Q3 GDP at 6.5% (against the forecasts of 6% previously) and Q4 GDP at 6% (against the estimates of 5.7% earlier), the RBI increased its real GDP growth projection for FY24 to 7% from 6.5% earlier.

The RBI's growth estimate for FY24 is little higher than the 6.8% growth many economists had predicted. The Reserve Bank of India has projected real GDP growth of 6.7% for Q1FY25, 6.5% for Q2FY25, and 6.4% for Q3FY25.

RBI Maintained its stance "withdrawal of accommodation"

The RBI remained to its "withdrawal of accommodation" policy and maintained the repo rate at 6.5%. The rates for the bank, marginal standing facility (MSF), and standing deposit facility (SDF) are at 6.75 percent and 6.25 percent, respectively.

The global economic climate is still unstable despite India's impressive growth, and inflation is still higher than the RBI's target of 4%. For these reasons, the RBI wishes to be prepared to intervene when necessary.

Despite occasional hiccups brought on by intermittent supply shocks, we have made great strides toward lowering inflation down to less than 5% in October 2023. Together with supply-side measures implemented by the government, our policy of prioritizing inflation over growth, gradually raising the policy rate by 250 basis points, and eliminating excess liquidity have been effective in bringing about this disinflation, according to Das.

RBI is more focused on controlling inflation

RBI Governor stated that, despite this progress, the 4% CPI objective remains unmet, hence current stance is maintained.. Headline inflation remains volatile as a result of several supply-side shocks that have become more frequent and strong. 

The rate of food inflation must be continuously watched. In the face of these uncertainties, monetary policy must be actively disinflationary in order to maintain a long-term alignment of headline inflation to the target rate of 4% while supporting growth, according to Das.

RBI proposed measures for increasing UPI transaction limit

The RBI proposed increasing the UPI transaction limit from ₹1 lakh to ₹5 lakh per transaction for payments made to healthcare and educational institutions. 

This will enable customers to make greater UPI payments for healthcare and education, according to Das.

RBI decision on e-mandate framework

Any recurring transaction over Rs.15,000 under the e-mandate framework is now subject to an extra factor of authentication (AFA). Recurring payments for credit card repayments, insurance premiums, and mutual fund subscriptions would have a limit increased to Rs.1 lakh per transaction by the RBI.

Also read: RBI Monetary Policy Meet: Policy rate remains unchanged at 6.50%

Governor Das stated that the current connected lending criteria have a narrow focus. As a result, the RBI has made the decision to provide a single regulatory framework for connected lending to all of its regulated firms. According to Das, this will enhance the way regulated firms handle credit and set their prices.

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