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PremiumRBI Monetary Policy Highlights: The Reserve Bank of India (RBI) Governor Shaktikanta Das announced the third bi-monthly Monetary Policy for FY25 today, August 8. The RBI Governor-headed six-member Monetary Policy Committee (MPC) decided to keep the benchmark repo rate unchanged at 6.5% and maintain the policy stance of ‘withdrawal of accommodation’. The MPC voted by a 4 to 2 majority to keep the policy rate unchanged. RBI retained real GDP growth estimates for FY25 at 7.2%, and CPI inflation projection at 4.5%. Stay tuned to our RBI policy live blog for the latest updates.
RBI MPC Meeting Highlights: Here are the key takeaways of the RBI Policy today:
1] Policy Measures:
2] GDP Growth Estimates:
3] CPI Inflation Forecast
4] Additional Measures
The minutes of the RBI MPC meeting will be published on August 22.
The next RBI MPC meeting is scheduled from October 7 to 9.
RBI Monetary Policy Live: RBI decided to increase the frequency of reporting of credit information to credit information companies (CICs) from monthly intervals to fortnightly basis or at such shorter intervals as mutually agreed between the credit institutions (CIs) and CIC.
“This is a very progressive move which will significantly strengthen the credit information ecosystem. With more frequent data reporting by banks and credit institutions, CICs will be able to update credit records faster and this will translate into more updated data being available for making informed lending decisions by credit grantors. This will also help in resolving consumer disputes faster based on updated data in the credit records. Credit information solutions help create economic opportunity for millions of people in India, and we take our responsibility to deliver accurate data very seriously," said Rajesh Kumar, MD & CEO, TransUnion CIBIL.
RBI Monetary Policy Live: Market reaction has remained muted as monetary policy was status quo and there was no mention of OMO sales or any other liquidity measures. We believe that if monsoons are on track and food inflation subsides, there is a very high probability of RBI changing its course on monetary policy from October policy. We expect RBI to deliver about 50 bps of rate cut in this cycle and suggest clients to hold duration in their portfolio, said Devang Shah, Head Fixed Income, Axis Mutual Fund.
RBI Monetary Policy Live: RBI's decision to keep the repo rate unchanged demonstrates a balanced approach to nurturing economic stability and growth. By prioritizing price stability and supporting investment, RBI aims to create a resilient economic environment capable of sustaining growth and withstanding external shocks. This prudent policy stance is expected to bolster investor confidence and contribute to India's economic resilience in the coming year, said Ashwani Dhanawat, Executive Director and Chief Investment Officer, Shriram General Insurance.
However, RBI is aware of potential risks. Geopolitical tensions, volatility in international financial markets, and geo-economic fragmentation pose significant challenges. The central bank's cautious stance reflects its readiness to navigate these uncertainties and mitigate any downside risks, Dhanawat added.
RBI Monetary Policy Live: Although core inflation is in a disinflationary trend, volatile food inflation is a cause of worry. Growth remains robust as visible in high frequency indicators. Global economic slowdown and financial market volatility is something which the MPC may have to address going forward. The evolving growth inflation dynamics point towards rate cuts beginning from December policy, said Parijat Agrawal, Head – Fixed Income at Union Mutual Fund.
RBI Monetary Policy Live: The continued pause in the policy rate and sticking with the stance of withdrawal of accommodation was expected given the RBI Governor’s earlier statements. There is no pressing need for any action on the policy rate as the yields on 10 year paper have already softened by almost 20 bps owing to the index linked flows. There is still volatility in food prices and risk of food inflation that will keep the CPI elevated above 4% in FY25. So, we should expect a continued pause till Q4 unless we have a lowering of the weightage of food in the index being adopted in the interim. A very important announcement has been on delegated payments in UPI. This will be game changing as far as base expansion for digital payment adoption and financial inclusion is concerned, said Ranen Banerjee - Partner and Leader Economic Advisory, PwC India.
RBI Monetary Policy Live: After today’s decision, India is positioned as an outlier in its interest rate stance, among the top economies. Most major economies like the US, Euro region and UK are facing high core inflation and low food inflation, unlike in India. Despite that there has been a shift towards dovish messaging. Japan was the only other major economy, apart from India, where food inflation is driving overall inflation. After the recent market fallout, BoJ is also sending dovish signals once again. I hope RBI can pivot at the most opportune moment to avoid falling behind the curve. Lowering borrowing costs will be in sync with PM Modi’s views on raising private sector investments, shared a few days ago during a CII meeting, said Debopam Chaudhuri, Chief Economist of the Piramal Group.
RBI Monetary Policy Live: Policymakers remain comfortable with the evolving growth trajectory and emphasized that RBI remains resolute in aligning headline inflation to the target of 4% on a durable basis. While core inflation is benign, stubborn food inflation poses the risk of second round effects and there requires constant vigil. Thus, policymakers are in no rush to lower their guard as of now. Trajectory of domestic food inflation and evolving path of the Fed rate are the key monitorables in the near-term, said Kapil Gupta, Executive Director- Research, Nuvama Institutional Equities.
RBI Monetary Policy Live: Expect policy stance change in October: Baroda BNP Paribas Mutual Fund
This settles all the noise regarding expectations of stance change given a lower core inflation. RBI’s unchanged inflation projection for FY25 instills our confidence that inflation continues to remain on a declining trajectory with current food shocks to be transitory. This along with developing global monetary policy dynamics around expectations of FED monetary pivot in September-24, creates a space for our expectations of a domestic monetary policy pivot in December-24. We expect a stance change in October-24 given inflation remains on track, said Prashant Pimple, CIO-Fixed Income, Baroda BNP Paribas Mutual Fund.
RBI Monetary Policy Live: A no change policy with the RBI keeping the repo rate and its stance unchanged. This decision to stay on course has been clearly guided by domestic factors even as rate cut expectations have risen globally. The overall tone of the policy seemed hawkish with the RBI highlighting the risks around stickiness in food inflation. The food inflation forecast was raised by 60 bps for Q2 FY25 to 4.4% and now inflation forecasts for the next four quarters all stand above 4%. With the RBI refraining from creating any space for a policy pivot, expectations of a future rate cut or change in stance will have to be pushed forward, said Abheek Barua, Chief Economist – HDFC Bank.
RBI Monetary Policy Live: Global investors’ sentiment vis-a-vis India is very high. Our assessment shows that global investors’ confidence on India is very very positive. India’s GDP growth is expected to be highest among major economies. International agencies have revised upwards their GDP growth forecast for India, says RBI Governor Shaktikanta Das.
RBI Monetary Policy Live: Not all household savings are being diverted into futures and options (F&O) trading. The issue has been discussed in the ‘Early Warning Group’ of regulators. SEBI is expected to take appropriate measures to address concerns relating to rising F&O trading volumes, says RBI Governor Shaktikanta Das.
RBI Monetary Policy Live: The bulk of FAR interest is concentrated in the 5-10 year segment, which represents 90% of total investments. The 30-year segment attracts only 2% of the overall investment stock, said RBI Deputy Governor.
RBI Monetary Policy Live: Banking system has regulatory parameters. We are not advising to go out of the regulatory parameters. Banks’ governance and risk management standards have improved. Banks should themselves decide on the risks with their new products and new drives launched, said RBI Governor Shaktikanta Das.
RBI Monetary Policy Live: The mismatch or divergence between bank deposit and credit growth may create liquidity management issues which the banks have to deal with. The banks need to be mindful of this as it may create structure challenges with respect to liquidity management, said RBI Governor Shaktikanta Das.
RBI Monetary Policy Live: The Liquidity Coverage Ratio (LCR) draft has been released for public feedback and the RBI is currently soliciting inputs from banks and other experts before finalizing the guidelines. The decisions on deposit rates are at the discretion of individual banks and will vary accordingly. The banks are advised to effectively use their branch networks to enhance deposit mobilisation, said RBI Governor Shaktikanta Das
RBI Monetary Policy Live: US economic growth quite well. We cannot draw conclusions based on a single month's unemployment data. It is premature to talk about the US recession. We will be watchful of all incoming data, domestic and external, and deal with situations. India has improved its resilience against external shocks, said RBI Governor Shaktikanta Das.
RBI Monetary Policy Live: RBI Governor Shaktikanta Das begins post Monetary Policy press conference
RBI MPC Meeting Live: The Central Bank has been looking at data and deciding on policy objectively. The food inflation and the impact of base effect on inflation doesn’t warrant a looser monetary policy. The reduction of reporting periodicity to CIC and continuous clearance of cheques are welcome steps. We believe that RBI will continue to keep the system liquidity in surplus to ease pressure on bank deposits, says Pralay Mondal, MD & CEO, CSB Bank.
RBI Monetary Policy Live: The RBI expectedly kept rates and stance unchanged with unambiguous focus being retained on inflation. With growth remaining robust the MPC still has room to hold on to policy stance to get confirmation on the disinflationary trend. We continue to expect scope for change in stance in the October policy with rate cuts beginning from December. The prospects of simultaneous change in stance and rate cuts could increase depending on how domestic inflation and global environment transitions, said Upasna Bhardwaj, Chief Economist, Kotak Mahindra Bank.
RBI Monetary Policy Live: Rupee is steady around 83.92 levels after the RBI kept rates steady at 6.50% at the policy meet. The dollar index after the positive sessions, today experienced a minor pull back and reading around 103.05.
“The central bank maintained an inflation projection for FY25 at 4.5%, stating that high food price momentum is expected to have persisted through July. Since the RBI is concerned with a mild uptick in inflation in the near term, we don't expect a rate cut at the coming meeting too. The WTI crude oil, after four weeks of weakness, has shown first signs of the pull back, hurting the rupee sentiment. The range for the USDINR will be 83.85 - 84.10 and the bias is expected to be positive for the pair," said Jigar Trivedi, Senior Research Analyst - Currencies & Commodities at Reliance Securities .
RBI Monetary Policy Live: Dr. Shashanka Bhide, Dr. Rajiv Ranjan, Dr. Michael Debabrata Patra and Shri Shaktikanta Das voted to remain focused on withdrawal of accommodation to ensure that inflation progressively aligns to the target, while supporting growth.
Dr. Ashima Goyal and Prof. Jayanth R. Varma voted for a change in stance to neutral.
RBI MPC Meeting Live: MPC members Dr. Ashima Goyal and Prof. Jayanth R. Varma voted to reduce the policy repo rate by 25 basis points.
Dr. Shashanka Bhide, Dr. Rajiv Ranjan, Dr. Michael Debabrata Patra and Shri Shaktikanta Das voted to keep the policy repo rate unchanged at 6.50%.
RBI Monetary Policy Live:Status quo on rates and policy stance was in line with our expectations. The RBI does not seem to be under any duress to act just because of global developments. Markets to be guided by development on the global policy front, domestic inflation, and monsoon progress, said Lakshmi Iyer, CEO - Investments & Strategy, Kotak Alternate Asset Managers.
She expects bond yields to continue to find an anchor due to FPI buying and maintains preference for government bonds over corporate bonds.
RBI Monetary Policy Live: RBI continues to bat for patience as domestic inflation is slowly but steadily trending towards the 4% target. In addition, global volatility, geo-politics adds to the challenges that keeps RBI on watch. RBI cannot afford the slightest error of judgement – perhaps the action of BoJ has put RBI under a bigger guard. Another spanner around deposit challenges from banks also means RBI is not in a mood to cut rates in the near term. Stay patient, stay put, policy rates to remain steady for longer, said Anitha Rangan, Economist, Equirus.
RBI Monetary Policy Live:The Governor continued to stress on the spill over risks emanating from higher food prices to generalised inflation. While the MPC has been wary of spillover risks, we do not see core inflation moving above 4% till end-CY24 and averaging at sub-3.75% in FY25. We maintain that growth is sub-par in India and do not subscribe to the RBI’s estimate of FY25 growth at 7.2% (Emkay: 6.5%). Weaker demand dynamics will keep pressuring core inflation. Besides, lower input prices ahead may help ease some pressure on output prices as well, says Madhavi Arora, Lead Economist, Emkay Global Financial Services.
We maintain Fed's pivot will precede and impact RBI's change in stance and rate action. Besides, staying relatively hawkish and highlighting the still-elusive durable 4% inflation target will only create unwanted INR carry, at a time when the RBI is still saddled with managing the problem of plenty, especially in H1FY25, Arora added.
RBI Monetary Policy Live: To improve the efficiency of cheque clearing and reduce settlement risk for participants, and to enhance customer experience, RBI proposed to transition Cheque Truncation System (CTS) from the current approach of batch processing to continuous clearing with ‘on-realisation-settlement’.
Cheques will be scanned, presented, and passed in a few hours and on a continuous basis during business hours. The clearing cycle will be reduced from the present T+1 days to a few hours, RBI Governor Shaktikanta Das said.
RBI Monetary Policy Live: RBI proposed to introduce "Delegated Payments" in UPI. “Delegated Payments" would allow an individual (primary user) to set a UPI transaction limit for another individual (secondary user) on the primary user’s bank account. This product is expected to add to the reach and usage of digital payments across the country.
RBI MPC Meeting Live: The MPC may look through high food inflation if it is transitory; but in an environment of persisting high food inflation, as we are experiencing now, the MPC cannot afford to do so. It has to remain vigilant to prevent spillovers or second round effects from persistent food inflation and preserve the gains made so far in monetary policy credibility, said RBI Governor Shaktikanta Das.
RBI Monetary Policy Live: India's foreign exchange reserves hit a record high of $675 billion as of August 2, RBI Governor Shaktikanta Das said. The reserves rose by $7.6 billion in the reporting week, as per Reuters' calculations. They had fallen by $3.5 billion in the prior week, the biggest in over three month
RBI Monetary Policy Live: The Indian stock market indices traded lower after the announcement of the RBI policy by Governor Shaktikanta Das. The Sensex traded 295.50 points, or 0.37%, lower at 79,172.51, while the Nifty 50 was trading 90.90 points, or 0.37%, lower at 24,206.60.
“The recent RBI policy announcement was largely uneventful, with the central bank keeping policy rates unchanged and continuing the withdrawal of accommodation as expected. The focus remains on tackling inflation, with no concerns about growth, and there are no indications of rate cuts in the near term. Consequently, the market will now turn its attention back to global cues. Although there are signs of a temporary bottom in the global market, Nifty, and Bank Nifty, there is still a risk of fresh selling pressure at higher levels," said Santosh Meena, Head of Research, Swastika Investmart Ltd.
Technically, Nifty is forming a bottom around the 50-DMA of 24,000, with important hurdles at 24,350, 24,525, and 24,700. Meanwhile, Bank Nifty is trying to establish a base around the 100-DMA of 5,000, with the key resistance area lying between 51,000 and 51,500, he added.
RBI Monetary Policy Live: RBI enhanced the transaction limit for UPI-based tax payments from ₹1 lakh to ₹5 lakh per transaction.
RBI Monetary Policy Live: The RBI proposed to create a public repository for digital lending apps. Regulated entities will report their digital lending apps to the RBI to ensure better oversight.
RBI Monetary Policy Live: Food price pressures cannot be ignored. The MPC may overlook high food inflation if it is transitory but cannot ignore persistently high food inflation due to its potential spillover effects, says RBI Governor Shaktikanta Das
RBI Monetary Policy Live: RBI retains FY25 CPI inflation forecast at 4.5%. The quarterly inflation forecast are -
RBI Monetary Policy Live: India’s foreign exchange reserve stood at a historic high of $675 billion as of August 2, 2024. India’s external sector remains resilient, says RBI Governor Shaktikanta Das.
RBI Monetary Policy Live: The domestic growth remains resilient, supported by steady urban consumption with manufacturing gaining traction due to improving demand. The inflation is receding gradually across economies, while medium-term global growth faces significant challenges, says RBI Governor Shaktikanta Das.
RBI Monetary Policy Live: RBI retains real GDP growth projection for FY25 at 7.2%, with ‘risks evenly balanced’.
The real GDP growth projection for Q1FY25 has been revised downward to 7.1% from earlier estimates of 7.3%. The real GDP forecast for Q2FY25, Q3FY25 and Q4FY25 have been retained at 7.2%, 7.3% and 7.4%.
RBI also projected Q1FY26 GDP growth at 7.2%.
RBI Monetary Policy Live: RBI maintains CPI inflation forecast for FY25 at 4.5%. Q1FY26 inflation forecast at 4.4%.
RBI Monetary Policy Live: RBI retains real GDP growth projection for FY25 at 7.2%. The quarterly projections are -
RBI Monetary Policy Live: The Monetary Policy Committee decided by a 4:2 majority to keep the policy repo rate unchanged at 6.5%. Consequently, the standing deposit facility (SDF) rate remains at 6.25%, and the marginal standing facility (MSF) rate and the bank rate at 6.75%, says RBI Governor Shaktikanta Das
RBI Monetary Policy Live: RBI’s Monetary Policy Committee (MPC) voted by a 4-2 majority to keep policy rates unchanged and also decided to maintain its ‘Withdrawal of Accommodation" stance
RBI Monetary Policy Live: RBI MPC decided to keep the repo rate unchanged at 6.5%, announces Governor Shaktikanta Das.
RBI Monetary Policy Live: RBI Governor Shaktikanta Das begins his monetary policy speech
RBI Monetary Policy Live: Watch RBI Governor Shaktikanta Das’ monetary policy speech live here.
RBI Monetary Policy Live: This policy may not be a “non-event" like June, given the sharp change in global macro backdrop since last policy, on sudden shift in US Fed rate cut expectations, said Kanika Pasricha, Chief Economic Advisor at Union Bank of India.
Amidst heightened global macro uncertainty, we expect the MPC to keep FY25 growth and inflation projections unchanged and stay data dependent. We believe that till the financial (in)stability is addressed, the RBI is required to keep rates on hold in our view. Also, food inflation remains a cause for concern and needs a close watch before the MPC can be assured of decline in inflation towards the 4% target and switch in monetary policy cycle. However, we duly acknowledge that global risks need close watch as well with expectations for Fed rate cuts by end of 2024 shifting from 45 bps by end-June to close to 100 bps currently. This will remain on close radar for the RBI-led MPC even though the latter can wait in our view, with relatively stronger growth dynamics providing for space to delay the start of a shallow rate cut cycle, she added.
RBI Monetary Policy Live: Indian stock market opened marginally lower ahead of the announcement of RBI policy today. The BSE Sensex traded 261.63 points, or 0.33%, lower at 79,206.38, while Nifty 50 was down 78.10 points, or 0.32%, at 24,219.40. Rupee opened 2 paise higher at 83.94 against the US dollar.
RBI MPC Meet Outcome Live: Economists expect RBI to maintain India’s GDP growth projection and inflation estimates. Care Ratings expect the RBI to retain its growth projection of 7.2% for FY25.
However, our GDP growth projection for FY25 is marginally lower at 7% (broadly in line with the Economic Survey’s projection of 6.5-7%). As far as the CPI projection is concerned, there could be some marginal upside risks to the RBI’s forecast of 4.5% for FY25. However, the RBI is likely to retain its previous projection in the August MPC meeting. We expect CPI inflation to average 4.8% in FY25. Given this situation, the MPC will exercise caution and seek further clarity on the evolving risks to the inflationary outlook, particularly concerning the food basket, before considering any changes in policy rates and stance, Care Ratings said.
RBI MPC Meet Outcome Live: The fluidity of global narratives and policy repricing, in conjunction with surplus banking liquidity, noisy food inflation back home, and a still-elusive 4% inflation target, make it tricky for the RBI to find a balance in its policy biases. Staying relatively hawkish will only create an unwanted INR carry, and increase the problem of plenty for the RBI. We continue to see easy/surplus system liquidity in H1. While the upcoming policy may not see any rate action, issues like 1) case and timing of policy pivot/stance change, and 2) factors influencing liquidity management ahead would be key for markets.
We expect softness in the policy tone, recognizing emanating macro forces and market risks. While curve steepening looks to be a popular trade, consistent repricing of Fed cuts and further unwinding of the Yen carry trade could spill over into the RBI’s reaction function and will be cyclically noisy for bonds/FX, in our view, said Madhavi Arora, Lead – Economist at Emkay Global Financial Services.
RBI MPC Meet Outcome Live: MPC is expected to maintain the status quo on rates. Expectations for rate cuts are increasing with the Fed signalling likely easing in the next meeting. Any fall in interest acts may provide scope for higher returns in mutual funds. FD investors who receive a fixed rate return may consider switching to an appropriate debt mutual fund after consulting with respective advisors and keeping in mind the risk profile, said Mahendra Kumar Jajoo, CIO – Fixed Income, Mirae Asset Investment Managers.
Bank deposits have grown at a rate much slower than credit in recent times. Banks also did not increase deposit rates enough when the market rates were moving higher. For example, the rate on savings deposits on many banks is still around 3%. As such, there seems no immediate scope for lowering rates in this segment. In longer maturity deposits also, rates seem unattractive compared to market rates. As such, it seems unlikely that banks may be able to lower the deposit rates by any significant margin for now, he added.
