RBI MPC meet live updates: RBI keeps repo rate unchanged at 6.5%

India as a country has stood out as a contrarian in the global arena. When the rest of the world was busy printing currency during the pandemic, we opted to put money directly into people’s (the ones who needed aid) pockets. When the Federal Reserve and European Central Bank started moving up interest rates, we didn’t rush in that direction immediately. Now, despite severe banking crises emanating in the US and Switzerland, largely owing to the failed banks not being able to cope up with the sudden increase in interest rates, central banks recently demonstrated their commitment to increase rates.

Reserve Bank of India will launch a secured web-based centralised portal named ‘PRAVAAH’ (Platform for Regulatory Application, Validation And AutHorisation) to simplify and streamline application processes.

The surprise move to hold repo rate should not be seen as an indicator of carrying out similar moves in the future, and RBI will “not hesitate” in taking further action on rates if needed, Governor Shaktikanta Das said.

Read the highlights of the RBI’s monetary policy statement regarding the MPC’s meeting

The RBI is proposing expanding the reach of UPI digital payments system by allowing credit to be offered via pre-approved bank lines. “This initiative will further encourage innovation,” RBI governor Shaktikanta Das said during the announcement of the bank’s monetary policy decision.

The central bank said it will put in place a comprehensive framework for strengthening and improving the efficacy of the grievance redress mechanism and customer service provided by the credit institutions (CIs) and credit information companies (CICs).

We strongly welcome the RBI’s move to decouple from the global tightening cycle and pause interest rate hike, which is in line with what CII had been advocating for long now. We agree with the central bank’s observation that the lagged impact of the past rate hikes should be allowed to percolate into the system, and not stifle demand by further rate hikes.

Though the domestic demand impulses remain healthy, the headwinds from the global banking stress have gained pace, hence it was important for the RBI to remain cautious in its stance. This move by the RBI will help to bolster business sentiments by containing the rise in borrowing costs which have constricted the pricing power of firms.

Keeping repo rates the same is a welcome decision. This may put to rest the anxiety amongst the borrowers that emanated with the EMI increase consequent to a series of repo rate hikes. Today’s move sends a positive signal and improves the sentiments. We expect the real estate along with other sectors to build up on this as it has come at the beginning of the new financial year. The prospective homebuyers will now be encouraged to crystallise their buying decision.

RBI’s pause on rates is positive for the housing market as it reduces the uncertainty and volatility associated with interest rate fluctuations. Home loan interest rates have gone up from 6.5 per cent to around 8.75 per cent with a series of rate hikes in the past and the move to pause will give a temporary reprieve and support the growth momentum in the real estate sector.

It will help boost sales especially in the affordable and mid-housing segments and encourage more people to invest in residential properties.

RBI’s pause on the rate hike is a clear indication of how it views the Indian ecosystem independently of the global environment and how it has consciously uncoupled from the Fed’s decisions. This is a great decision as it helps communicate to the market that growth and inflation management are both important

Relaxation of offering NDF rupee derivatives to resident users in onshore market NDF rupee will help deepen the rupee trades in the forex market and is a positive step towards rupee internationalization, especially with the backdrop of increased rupee bilateral trades.

The Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) surprised by keeping policy rates unchanged, while keeping options open on future rate actions and maintaining stance of withdrawal of accommodation.

In an environment of volatile global developments and tight financial conditions, the RBI will remain data-dependent on setting rates. It will also now want to carefully evaluate the consequences of a cumulative 250 bps rate hikes since May 2022, which has been the fastest pace of hikes in the past decade.

Monetary policy typically impacts real economy with a lag of 3-4 quarters, and the full impact is expected to slow growth and moderate inflation in fiscal 2024. The RBI is likely to respond by cutting rates towards the end of fiscal 2024.

“The policy appears to be a hawkish pause as the MPC turns data dependent whilst it awaits the monetary efficacy from prior rate hikes to play out into the deposit and lending rates.

With the Governor stating that today’s pause on policy rates is for this policy only, it has the elbow room to act on rates if inflation readings surprise on the upside. Basis the current growth-inflation dynamics and the global backdrop, the Repo Rate is likely to peak out at 6.50-6.75% with a possibility of a final 25bps to be delivered in 1H FY24.”

“MPC’s decision came despite elevated headline inflation numbers in the last two months, high sticky core inflation while growth indicators have been holding up quite well. The pause may reflect MPC members’ intention of not upsetting the growth momentum despite persistently high inflation.

The underlying question is – are we done with the rate hikes? Continuing with the ‘withdrawal of accommodation’ stance could provide elbow room to take one more rate hike later which would be data-dependent, forward growth-inflation dynamics, and upside risks to food inflation emanating due to unseasonal/deficient rains in case of El Nino conditions. After raising the repo rate by 250bps, RBI seems to have adopted a wait-and-watch approach.”

“We expect that growth could be lower at 6% this fiscal while there are upside risks to the RBI’s inflation forecast, especially given the impending risks around oil prices and the performance of monsoons. Going forward, the RBI could go for “the higher for longer” narrative – staying on an extended pause in FY24 while tightening liquidity conditions.

Therefore, short-term rates could remain under pressure over the coming months. For the 10-year yield we could see some pressure return once the governments’ borrowing program kicks in and a range of 7.20-7.30% is likely in the first quarter.”

“RBI’s decision will provide relief to MSMEs and consumers who have been battered in recent months by rising inflation and increasing credit cost.

The move to keep policy rate unchanged reflects RBI’s confidence that the spike in CPI inflation during January and February was transitory in nature and hence does not warrant a further hike in policy rate.

The decision will support credit growth, consumption, capital investment, and overall economic growth, at a time when GDP growth is showing visible signs of slowdown.”

“As we had expected, RBI’s pause in the rate hike cycle was the appropriate step at this point. It was necessary to assess the impact of previous rate hikes and balance the growth and inflation dynamics. There is renewed caution in the global economic landscape and optimism for a turnaround in global economic prospects is waning. Bank collapses in the first half of March 2023 have led to fears of contagion risk across financial markets. Even though India’s growth has been resilient so far, the country is not decoupled.”

“We didn’t want something which is just incremental or just a substitute of what’s there. We didnt see any innovative or infrastructural solutions in the proposals we have got,” DG Sankar said on New Umbrella Entity (NUE)

“Investors are expected to read the terms and conditions of AT1 bonds. Most of the investors are HNIs,” he said.

The RBI Governor was answering a query from businessline.

The current Monetary Policy Committee stance is valid only till the June policy outcome, he said.

The RBI Governor was answering a question about whether the RBI is overoptimistic on growth.

“Overall, we are optimistic about the Indian economy,” RBI Governor Shaktikanta Das said.

“The RBI taking a pause in their rate hike cycle was a prudent step. The development will be a big positive for most sectors. It will help push the prices of precious metals to the higher side. The move will help them assess the impact of the previous rate actions.

A robust rabi crop will most likely ease the pressure on inflation. A steep rate hike will hurt growth. Today’s move also raises hope of a rate ease cycle to start in the October-December quarter.”

“It is interesting that while RBI has paused on the policy rate front; it has also strongly reiterated its commitment to bringing down inflation. Given the uncertain global environment and lingering risks to inflation, it is apt that RBI keeps the window open for further monetary policy tightening in the future. However, with inflation likely to trend downward from the current level, it is unlikely that RBI will have to hike rates further in 2023.

We expect a status quo in policy rate in 2023. Even while emphasising the risks posed by the global uncertain economic environment, the RBI remains quite optimistic on growth, raising the GDP growth projection for FY24 to 6.5%. This is higher than our GDP growth projection of 6.1% for FY24.”

“The unchanged policy rate has been met by non-committal forward guidance, clearly giving more stress to fluid and uncertain global situation, implying macro assessments might require appropriate adjustments ahead from the policy perspective. However, the Governor stressed that their inflation fight is not over and we are still away from durable disinflation with unyielding core inflation still a concern.

We think it appears to be a pause for good especially as the ex-ante real rates looking around 1.1% - keeping our one-year forward inflation forecast as anchor, giving them comfort and flexibility on their supposed stance and actions ahead.”

“RBI’s prudent choice to hold off on raising rates is a welcome move as the realty sector was hoping for a pause as the cost of construction has been consistent. The consumer sentiment within the residential real estate segment will witness a further uptick. While the industry has been witnessing growing demand, a further hike in rates could dampen the deal within few segments. Luxury homes will see even better demand with this move as it will give high-ticket buyers and investors increased confidence and incentive to buy.”

“RBI’s decision was a surprise move but has been done with the view of the withdrawal of accommodation while keeping a close eye on inflation. This is highly encouraging for the infrastructure, housing, and other real estate segments as this decision, for now, allays fears of a further increase in financial burden on developers and borrowers. With the borrowing cost expected to remain largely stable, the overall growth momentum will get a fresh impetus.”

“The policy appears to be a hawkish pause as the MPC turns data dependent whilst it awaits the monetary efficacy from prior rate hikes to play out into the deposit and lending rates. With the Governor stating that today’s pause on policy rates is for this policy only, it has the elbow room to act on rates if inflation readings surprise on the upside. Basis the current growth-inflation dynamics and the global backdrop, the Repo Rate is likely to peak out at 6.50-6.75% with a possibility of a final 25bps to be delivered in 1H FY24.”

“Well-timed decision by MPC to pause on evolving global and domestic macroeconomic and geopolitical scenarios. Expecting an extended pause from MPC on the back of resilient growth and inflation trending downwards.”

“While most Central banks have given more weightage to inflation as compared to growth, RBI stroke a nice balance between the two, giving primacy to growth.”

Sakthivel said that the increasing investment will lead to further production and easing of supply thus reducing the inflation in the next couple of months.

The status quo in rates will also help our exporters whose cost of credit has gone substantially due to upward revision in rate in the last one and half year leading to the demand to increase the interest subvention from 2% and 3% to 3% and 5% respectively, he added.

“RBI was proactive last year when they showed unprecedented proactiveness in starting the tightening cycle and even now in pausing it, remaining ahead of the curve. This essentially is a sign that it is willing to adopt a balanced approach between growth and inflation, and is not purely data-driven or single-minded in its approach. We believe this is a fairly positive move for the equity markets. “

“We expect both GDP and inflation to be significantly below the RBI’s year-end estimate of 6.5% and 5.2%, respectively. Interest rates are likely to soften considerably from current levels and bonds will perform well this year generating capital gains over and above the coupon rates. Passive investments like fixed deposits will underperform debt funds.”

“In our view, this reflects a forward-looking monetary policy that takes into cognizance elevated global growth risks, under-control inflation trajectory, and the need to wait-and-watch and assess the impact of the sharp policy tightening already delivered. However, the RBI has kept the door open to further action if macro conditions change, also in line with our expectations. We maintain our view of a policy pause and 75bp of rate cuts, starting from October.”

“Financial stability concerns appear to have pre-empted a pause as the Monetary Policy Committee assesses the impact of its cumulative 250 basis points of rate hikes. If inflation does not fall in line with the Monetary Policy Committee’s assessment for the quarter ending June, another hike could be in the offing, especially if the financial stability situation stabilises.”

“After six consecutive hikes, RBI MPC’s decision to pause on further increase in rates is a welcome move. With inflationary pressures now taming down, this will bring back focus on growth, credit off-take, consumer spending, Real Estate, Infrastructure and specifically housing sector demand.”

“With inflation still elevated and recent rate hikes by most major central banks, chance of a 25-bps rate hike was considerable. The RBI opting for a pause seems to suggest that the central bank expects softer inflation and growth. With this, it seems that the RBI has come to the end of rate hike for this cycle. Unless there was a big surprise either on inflation or growth, we expect the RBI to remain in pause mode during 2023.”.

“Today’s pause in the rate hike cycle is a very positive and welcoming move by the RBI. The consumer inflation in the economy has sustained above the RBI’s upper threshold of 6% and is more likely to remain sticky in the next few months following the recent crude oil production cut by the OPEC countries and Russia.

Consumer inflation arising from such events is beyond the central banks’ control. Any further hike in the repo rate and lending rates along with sustained inflation could potentially reduce the spending capacity of the consumers which in turn can dampen India’s economic growth. RBI’s decision to pause its rate hike cycle is supportive of economic growth.”

“The RBI decision to keep the repo rate unchanged comes as a positive surprise for most sectors. Real estate will rejoice in the move the most. The central bank has already hiked the rates 6 consecutive times since May 2022, cumulatively 250 bps. There were concerns that the move was affecting the recovery and growth of the economy.

We foresee a resilient upward demand trajectory going forward. The momentum in the market is currently driven by the need to upgrade to a better living and the admiration of real estate as a weatherproof asset class which will continue during the year and the due credit goes to this move from the RBI.”

“The pause in the rate cycle will be positive for the bond markets and government borrowings. Despite a higher issuance of gsecs in H1FY24, we don’t expect the 10 yr g-sec yields to move appreciably above the current levels. RBI will also ensure that the liquidity in the system remains either neutral or slightly in surplus.”

“In contrast to the World Bank, India Inc. applauds the RBI’s decision to pause the rate hike cycle. This act of relief will restore confidence in homebuyers’ sentiment and boost demand rally in the real estate. The industry body now calls for fiscal intervention from the Government of India to cool the inflationary heat caused by persistent geopolitical turbulence caused by the collapse of foreign banks, supply chain challenges, and global financial instability.

Additionally, devising innovative flexi or step-up EMI schemes by the banks and Housing Financing Institutions will be conducive for the market players to onboard new home buyers in the high interest rate regime.”

“MPC of RBI decision of continuing focus on withdrawal of accommodative stance and keeping repo rate unchanged was in line with IMC expectation considering resilience shown by economy, robust macro economic fundamentals, forex at comfortable level and projection of softening of inflation in 2023-24.”

“The RBI’s pause is like Sachin stroke on a tricky pitch but with eyes set in and having the luxury of hitting the ball where ever he wanted. The RBI had the option of a rate hike or a pause. The pause was not entirely unexpected.

The RBI will watch developments and data before taking the next call. The market expects the RBI to fetch maximum run and win the match on inflation and growth, no mater which Direction they hit the ball.”

The Reserve Bank of India said it is proposing to permit banks with IFSC banking units to offer non-deliverable forex derivative contracts involving the rupee to resident users in the onshore market.

“Despite inflationary pressure and other geopolitical issues, RBI decision to maintain the status quo on policy rates is good news for homebuyers.

Rising home loan interest rates has become a growing concern for both home buyers and supply-side stakeholders. To some extent the higher home loan interest rates have dampened the demand for affordable and mid-segment housing as buyers in these segments are more price-sensitive. While the luxury and high-end segments have not been significantly impacted yet, further increases could have affected the overall industry.

We remain optimistic that inflation will come under control and there will be no further increase in policy rates.”

“After six consecutive hikes, RBI MPC’s decision to pause on further increase in rates is a welcome move. With inflationary pressures now taming down, this will bring back focus on growth, credit off-take, consumer spending, real estate, infrastructure and specifically housing sector demand.”

The Nifty 50 was up 0.30% at 17,610.20 as of 11:01 a.m. IST, while the S&P BSE Sensex rose 0.32% to 59,882.93. Both benchmarks had fallen 0.3% ahead of the RBI’s rate decision.

Nifty 50 (17,595) and Sensex (59,835) gain nearly 0.25 per cent each. The rise in the benchmarks could be attributed to the decision of the RBI to keep the repo rate unchanged at 6.5 per cent.

At 10.53 am, Godrej Properties was up 3.8 per cent at ₹1096.50, DLF was up 2.8 per cent at ₹377.10, Sobha Ltd was up 1.6 per cent at ₹448.85, Brigade Enterprises was up nearly 1 per cent at ₹473.35, while mall operator Phoenix Mills was up 0.7 per cent at ₹1305.25 on the NSE. The Nifty Realty index was also up 2.1 per cent at 401.35 points.

RBI has decided to develop a centralised web portal for public to enable search across multiple banks for possible unclaimed deposits based on user inputs.

Government bond yields plunged after the RBI kept policy rates unchanged, against wide expectations of a seventh consecutive rate hike.

“The RBI’s decision to keep the repo rates unchanged comes as a welcome respite to homebuyers. This particularly gives relief to affordable and mid segment homebuyers who feared a possible rate hike today, making property buying via home loans even harder,” Puri said in a company press release.

​The rupee declined to an intraday low of at 82.06 per US dollar versus 81.88 before the RBI policy announcement​

RBI Governor Shaktikanta Das noted that the global economy is facing renewed phase of headwinds, with bank failures overseas bringing financial stability into focus.

The MPC, in its first meeting of FY24, voted by a majority of five out of six members to remain focused on withdrawal of accommodation to ensure that inflation remains within the target.

The six-member rate-setting monetary policy committee (MPC) voted unanimously to hold the policy repo rate at 6.50 per cent, with readiness to act should the situation so demand even as it decided to evaluate the impact cumulative 250 basis points rate hike since May 2022.

“Our job is not yet finished and the war against inflation has to continue until we see durable decline in inflation closer to the target,” he said.

The Reserve Bank of India (RBI) has marginally increased its ​real GDP growth projection​ for FY24 to 6.5 per cent from its earlier projection of 6.4 per cent.

Retail inflation rose to a 3-month high of 6.52% in January, and eased to 6.44% in February

In its previous bi-monthly review of the monetary policy, the ​​RBI ​​on February 08, 2023 increased the repo rate by 25 bps to 6.5 per cent.

RBI cited surveys to highlight that manufacturing, services, and infrastructure sector firms were optimistic about the business outlook. On the other hand, protracted geopolitical tensions, tightening global financial conditions and slowing external demand may continue as downside risks to domestic output.

On economic growth, the RBI had said that the expected higher Rabi output had improved the prospects of agriculture and rural demand. It said, “The sustained rebound in contact-intensive sectors should support urban consumption. Broad-based credit growth, improving capacity utilisation, government’s thrust on capital spending and infrastructure should bolster investment activity.”

In the February meeting of the MPC, the RBI had projected inflation at 6.5 per cent for 2022-23, with Q4 at 5.7 per cent. On the assumption of a normal monsoon, CPI inflation is projected at 5.3 per cent for 2023-24, with Q1 at 5 per cent, Q2 at 5.4 per cent, Q3 at 5.4 per cent and Q4 at 5.6 per cent. The central bank had asserted that the risks were ‘evenly balanced’.

The Nifty 50 was down 0.12% at 17,533.85 as of 9:23 a.m. IST, while the S&P BSE Sensex shed 0.13% to 59,607.13. This is ahead of what many expect to be the Reserve Bank of India’s final interest rate hike in the current cycle.

Indian government bond yields were largely unchanged early on Thursday, as market participants awaited the Reserve Bank of India’s monetary policy decision as well as guidance on the interest rate trajectory.

The rupee traded at 81.9075 per dollar by 9:27 a.m. IST, compared to its previous close of 82. It firmed to a three-week high on Wednesday on the back of foreign banks’ dollar sales, likely for their custodial clients, traders said.