RBI MPC Update: Repo Rate Unchanged and Economic Projections Revealed

Repo Rate Stability

RBI MPC Update: RBI Governor Das announced that the Monetary Policy Committee (MPC) has opted to maintain the repo rate at 6.5%, in line with the decision made during the previous MPC session. This marks the fifth consecutive time the repo rate has remained unchanged, with the last adjustment occurring in February 2023.

Economic Outlook

Governor Das provided insights into the economic landscape, highlighting the Indian government's commitment to fiscal consolidation. Fiscal consolidation means reducing the fiscal deficit. Despite challenges, domestic agricultural activity remains robust, while the services sector is expected to exhibit resilience. The financial system continues to demonstrate strength with a healthy balance sheet.

Growth Forecast

The RBI MPC has projected real GDP growth for FY25 at 7%, with quarterly growth rates forecasted at 7.2% for Q1, 6.8% for Q2, 7% for Q3, and 6.9% for Q4. These projections reflect cautious optimism regarding India's economic trajectory.

Updates on Retail and MSME Loans

In a move to enhance transparency, the requirement for a Key Fact Statement is being extended to cover all retail and MSME loans. Banks will be provided with a grace period to comply with this regulatory adjustment.

Liquidity Measures

Despite a shift to systemic liquidity deficit in September 2023, surplus liquidity remains in the banking system after accounting for government cash balances. Governor Das emphasized the market-driven nature of the Indian rupee's exchange rate, highlighting its stability amidst global economic fluctuations.

Inflation Forecast

Headline inflation has moderated to 5.5% on average during April-December 2023, compared to 6.7% for the entirety of 2022-23. The CPI inflation forecast for January-March 2024 has been revised downwards to 5.0%, with similar adjustments for subsequent quarters, signaling a more optimistic inflation outlook.

Review of Electronic Trading Platforms (ETP)

In response to evolving market dynamics and requests from market makers, the RBI has decided to review the regulatory framework for electronic trading platforms (ETP). This review aims to address advancements in technology, increased integration of onshore and offshore forex markets, and market participants' evolving needs.

Digital Transactions Framework

The RBI introduced a framework for authenticating digital payment transactions, aimed at bolstering digital security through a principle-based approach. Detailed guidelines for implementing this framework will be issued separately, fostering a more secure digital payments ecosystem.

Also read: India Witnesses Surge in High-Income Earners in 2023-24

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