RBI Monetary Policy: Key Takeaways from Governor’s Address

Under the leadership of Governor Shaktikanta Das, the Reserve Bank of India (RBI) presented its fourth bi-monthly monetary policy on October 6. Here are the key takeaways:

No Rate Change

• The Monetary Policy Committee (MPC) unanimously decided to maintain the repo rate at 6.50%.
• The standing deposit facility (SDF) rate stands at 6.25%.
• The marginal standing facility (MSF) rate and the Bank Rate remain at 6.75%.

Policy Stance

• RBI continues its commitment to target an inflation rate of 4%.
• Emphasis is placed on balancing inflation with the goal of supporting economic growth.

Interest Rates

• Cash Reserve Ratio (CRR) is stable at 4.5%.

GDP Projections

• Annual GDP growth for FY24 is predicted to be 6.5%.
• Quarterly projections for FY24: Q2 at 6.5%, Q3 at 6%, and Q4 at 5.7%.
• Initial estimate for Q1FY25 stands at 6.6%.

Inflation Outlook

• The CPI inflation rate for FY24 is projected at 5.4%.
• Quarter-wise, the CPI inflation for Q2FY24 has been adjusted to 6.4%, while Q3FY24 is slightly reduced to 5.6%. Both Q4FY24 and Q1FY25 estimates remain steady at 5.2%.

Developmental and Regulatory Policies

• Urban Co-operative Banks (UCB): Those meeting the PSL targets by March 31, 2023, will have their gold loan limit increased from ₹2 lakh to ₹4 lakh.
• Card-on-File Tokenisation: RBI plans to initiate CoF token facilities at the issuing bank level, making token creation more straightforward for cardholders.
• PM Vishwakarma under PIDF scheme: The scheme is extended for an additional two years until December 31, 2025.
• Self-Regulatory Organisations (SROs) Recognition: An all-encompassing framework is set to be introduced by the RBI, detailing the roles, criteria, and functions of SROs.
• Projects Finance Framework: A detailed regulatory system for ongoing projects will be developed for all regulated entities.
• Credit Concentration Norms: Middle and Base Layer NBFCs can balance their exposures using appropriate credit risk transfer instruments.

This policy update reflects RBI’s consistent commitment to achieving stable inflation while supporting growth. The adaptations and improvements aim to bolster the financial ecosystem and provide stability in these uncertain times.