RBI monetary policy: Status quo on repo rate for 9th consecutive time - 5 key highlights from RBI MPC outcome

RBI monetary policy: For the ninth consecutive time, the Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) on Thursday, August 8, maintained a status quo on policy rates, keeping the benchmark repo rate unchanged at 6.5 per cent. The MPC also maintained the policy stance of ‘withdrawal of accommodation’ even as it highlighted solid economic growth and signs of easing inflation.

The MPC decided by a 4:2 majority to keep the policy repo rate unchanged. Thus, the standing deposit facility (SDF) rate remains at 6.25 per cent, and the marginal standing facility (MSF) rate and the bank rate stay at 6.75 per cent.

Here are five key highlights from the RBI MPC outcome:

No change in policy rates, stance

On an expected line, the RBI MPC chose to keep the repo rate and monetary policy stance unchanged in the August policy meet.

Governor Shaktikanta Das announced that the MPC decided to keep the repo rate unchanged at 6.5 per cent by a majority of 4:2. The MPC also decided to maintain its ‘withdrawal of accommodation" stance to ensure that inflation progressively aligns to the target, while supporting growth, said Das.

GDP forecast unchanged for FY25

RBI retained its real GDP growth forecast for FY25 to 7.2 per cent, with Q1 at 7.1 per cent, slightly down from the earlier projection of 7.3 per cent.

“We have slightly moderated the growth projection for Q1 of the current year primarily due to updated information on certain high-frequency indicators which show lower than anticipated corporate profitability, general government expenditure and core industries output,” said Das.

However, the central bank maintained the GDP growth forecasts for Q2 at 7.2 per cent, Q3 at 7.3 per cent, and Q4 at 7.2 per cent. The GDP growth forecast of Q1FY26 is 7.2 per cent.

Core inflation easing but food inflation a key concern

According to the RBI, Core inflation moderated to a historic low in May and June. CPI excluding food and fuel, or the core inflation, moderated from 3.2 per cent in April to 3.1 per cent in May-June 2024.

However, food inflation, which has a weight of around 46 per cent in the CPI basket, remains a concern. Food inflation contributed to more than 75 per cent of headline inflation in May and June, said the RBI. Vegetable prices contributed about 35 per cent to inflation in June.

Governor Das underscored that the high food price momentum is likely to have continued in July. However, favourable base effects may push headline inflation downwards in July. The pick-up in the southwest monsoon and healthy progress in sowing could offer some relief on the inflation front.

The MPC has maintained its CPI (Consumer Price Index)-based inflation projection for FY25 at 4.5 per cent. However, there have been some changes in the inflation forecast across different quarters. Q2 FY25 forecast is now 4.4 per cent from 3.8 per cent earlier, Q3 forecast is now 4.7 per cent from 4.6 per cent, and Q4 forecast is now 4.3 per cent from 4.5 per cent earlier. The forecast for Q1FY26 is 4.4 per cent.

"Headline inflation is moderating, but the pace is uneven and slow," said Das.

A public repository of lending apps

For the orderly development of the digital lending ecosystem and to address the issues from unauthorised digital lending apps (DLAs), the RBI proposed to create a public repository of DLAs deployed by its regulated entities.

"The regulated entities (REs) will report and update information about their DLAs in this repository. This measure will help the consumers identify the unauthorised lending apps," said Governor Das.

Continuous clearing of cheques

At present, cheque clearing through has a clearing cycle of up to two working days. The RBI proposed to reduce the clearing cycle. Cheques may now be cleared within a few hours on the day of presentation, benefitting both the payer and the payee due to faster cheque payments.

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