RBI Monetary Policy: Status quo on rates to policy stance - 5 key takeaways from RBI governor statement

The Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) unanimously decided to keep the repo rate unchanged at 6.5 per cent on Friday. The central bank also retained its policy stance as the "withdrawal of accommodation" with five out of six MPC members voting in favour of this.

There was hardly any surprise in the October policy but the tone of the RBI Governor remained hawkish as he reiterated the central bank's focus on bringing inflation sustainably down. 

Also Read: RBI Monetary Policy Committee Meeting Live Updates

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Here are the five key highlights of the RBI MPC meeting outcome:

1. Status quo on rates, and policy stance

RBI maintained the status quo on policy rates and the stance of its monetary policy. The RBI kept the repo rate unchanged at 6.5 per cent and stance as the “withdrawal of accommodation”.

“The monetary policy committee decided unanimously to keep the policy repo rate unchanged at 6.50 per cent. Consequently, the standing deposit facility (SDF) rate remains at 6.25 per cent and the marginal standing facility (MSF) rate and the Bank Rate at 6.75 per cent," said RBI Governor Shaktikanta Das.

“The MPC also decided by a majority of five out of six members to remain focused on the 'withdrawal of accommodation' to ensure that inflation progressively aligns to the target, while supporting growth,” said Das.

RBI Governor underscored India's growth remains resilient despite challenging times. 

“The Indian economy is forging ahead in a challenging global environment, drawing strength from its underlying macroeconomic fundamentals and buffers,” Das said.

However, the central bank emphasised there is no room for complacency because of volatile food and energy prices.   

“Volatile energy and food prices in the wake of lingering geopolitical tensions and adverse weather conditions render uncertainty to the inflation outlook. We remain vigilant of the evolving inflation dynamics,” Das said. 

Also Read: RBI Monetary Policy Committee Meeting: Repo rate unchanged at 6.5%, stance accommodative

2. Fight against inflation continues

RBI Governor emphasised that the fight against inflation is not over yet and the central bank is targeting inflation at 4 per cent and not between 2-6 per cent.

“I would like to emphatically reiterate that our inflation target is 4 per cent and not 2 to 6 per cent. Our aim is to align inflation to the target on a durable basis while supporting growth,” said Das.

The latest CPI inflation projection for FY24 is 5.4 per cent, with Q2 at 6.4 per cent, Q3 at 5.6 per cent and Q4 at 5.2 per cent. CPI inflation for Q1FY25 is projected at 5.2 per cent.

Global headline inflation could remain high for a longer period than estimated. In contrast to global trends, domestic economic activity exhibits resilience on the back of strong domestic demand, said Governor Das.

Also Read: RBI maintains CPI inflation forecast for FY24 at 5.4%

3. No change in the growth forecast

RBI kept the GDP growth forecast for FY24 unchanged at 6.5 per cent with Q2 GDP growth forecast unchanged at 6.5 per cent, Q3 unchanged at 6 per cent, Q4 GDP growth forecast unchanged at 5.7 per cent and Q1FY25 unchanged at 6.6 per cent.

Also Read: RBI Monetary Policy: GDP growth forecast for FY24 unchanged at 6.5%, says Governor Shaktikanta Das

4. Sales of government securities on the cards

Das said RBI may consider OMO (open market operation) sales of government securities to manage liquidity consistent with the stance of monetary policy. 

“We may have to consider OMO-sales (Open Market Operation sales) to manage liquidity, consistent with the stance of monetary policy. The timing and quantum of such operations will depend on the evolving liquidity conditions,” said Das.

5. New channels for card-on-file tokenisation (CoFT) 

Das proposed to introduce card-on-file tokenisation (CoFT) creation facilities directly at the issuer bank level.

"This measure will enhance convenience for cardholders to get tokens created and linked to their existing accounts with various e-commerce applications," said Das.

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