RBI MPC Meeting June 2024 Highlights: RBI holds repo rate at 6.50%; forecasts 7.2% GDP growth for FY25

Indranil Pan, Chief Economist at YES BANK:

“Even as one more member has now turned in favour of a stance change and a rate change, we do not see the RBI in any hurry to move towards a pivot. The governor points out to the fact that there continues to be risks from food inflation and the summer price changes are visible on the backdrop of a shallow winter price drop. In this context, the RBI would watch out for the pulses and vegetables prices that have seen a recent uptick in prices. There are come cautionary statements for the core inflation too. It was pointed out that the early results from its enterprise surveys do point towards firms expecting the selling prices to stay firm. Importantly, for the RBI, the 4% inflation target to be reached on a durable basis remains sacrosanct. The comment that comes to the fore is his mention of the fact that the currently expected 3.8% average inflation for Q2 FY25 is likely to be a one-off and inflation is expected to move higher beyond this point. Overall, this policy continues to echo similar sentiments as in the previous policy – that the RBI is unlikely to make any haste in its decision to pivot and will remain driven by the domestic growth-inflation mix in determining the timing of its policy move. In our opinion, with growth expected to remain firm, the last phase of dis-inflation towards the 4% target remains arduous and hence the RBI would be willing to bide its time. We see a shallow rate cut this fiscal, probably starting in December 2024.”

Achala Jethmalani, Economist, RBL Bank: 

MPC maintains a cautious pause and the commentary suggests that the MPC’s policy decisions will be determined by domestic growth-inflation dynamics while considering the impact monetary policy outcomes in the advanced economies. The RBI Governor explicitly stated in the context of ‘follow the Fed’. Given India’s growth-inflation dynamics, we expect a rate-cut to possibly come through in Q4FY25 with a change in policy stance by December 2024. The progress of SW monsoon and the July budget will be critical inputs in the August policy.

Shreya Sodhani, Regional Economist, Barclays:

The Reserve Bank of India’s monetary policy committee (MPC) voted 4-2 to hold the repo rate at 6.50% and to maintain the policy stance as “withdrawal of accommodation.”

External MPC member, Dr. Ashima Goyal joined Professor Jayanth Varma in voting for a 25bp cut; both also voted to changing the stance to neutral. While this was not our baseline, we had noted the risk that Dr. Goyal could change her vote with the February and April meeting minutes showing that she was much closer to the dovish end of the spectrum.

Despite two dissenting votes, we think the MPC statement was relatively balanced, as also reflected in Governor Das’s rhetoric. While noting that inflation continues to moderate due to favourable core and fuel prices, the governor noted the need to remain “vigilant” on food prices and the “work remaining to be done”. Governor Das also highlighted the rising international prices of industrial metals, which could exacerbate the domestic input cost conditions.

On the other hand, the central bank’s confidence on growth seems to have increased, which in Governor Das’ words, provides “greater elbow room to pursue price stability “. This implies that within the growth/inflation matrix, the RBI’s focus remains on navigating the last mile of disinflation. The governor did highlight the degree of disinflation that has already been achieved without hurting growth, but emphasised the commitment to align inflation with the 4% target, as sustained price stability helps to achieve stronger growth for a prolonged

The Reserve Bank of India on Friday proposed a facility to allow customers to automatically replenish their UPI Lite wallets to promote small-value digital payments.

Currently, the UPI Lite has a daily limit of ₹2,000, while the upper limit for a single payment is ₹500.

No worry on managing inflows due to bond inclusion, RBI Governor Shaktikanta Das said. 

We will use AI and machine learning to detect fraud proactively, the Deputy Governor added.

If there are outliers we engage with them, the Governor added. There are 9,500 NBFCs and we have put restrictions only against 3, he said. It is not as if there are large-scale deficiencies in the system, the governor added. In a few cases, where we found deficiencies, we engaged with them and corrective action was taken, said the governor.

We don’t have an ideal CD ratio, said Deputy Guv Swaminathan. We do not have any ideal C-D ratio that can be prescribed, the deputy governor added. If credit-deposit gap widens it can lead to liquidity risk, said Swaminathan.

Would like them to restrategize their business in case if the ratio, they are pursuing business with, is not sustainable.

UPI Lite is becoming popular, seeing 10 million transactions a month, the deputy added.

We have seen some outlier entities who are charging high interest rates and we have asked them to justify it, said the RBI Governor. 

We are watchful on inflation, said the Reserve Bank of India Governor Shaktikanta Das. The journey towards 4% is sticky, he added. Have not given any indication about rate cuts, he said. After reaching 4% level, inflation has to stay there for some time, added the central bank governor. 

New tools are deployed according to the circumstances, said RBI Governor Shaktikanta Das. 

Asset liability mismatch is a concern that is being flagged; it is up to the respective boards to plan and manage it, said RBI Deputy Guv Swaminathan Janakiraman. It is our intention to flag possible areas of risk and communicate them to the regulated entities, he added. 

RBI Deputy Guv said that nothing is off the table (with respect to interest rate cuts).

RBI Governor said that even if the US Fed eases rates, we may not (interpretation of statement saying that India may not follow Fed). 

Foreign exchange reserves have reached a historical high, said the Governor. Reserve Bank stands committed to maintaining stability and orderliness in all segments of the financial markets and institutions regulated by it, he added.

Monetary Policy is guided by domestic macroeconomic conditions, said the RBI Guv Shaktikanta Das.

Growth inflation balance is evolving as per projections, said Reserve Bank of India Governor Shaktikanta Das. Headline CPI inflation is moderating, but the last mile of disinflation is sticky, he added.

Ritesh Jain, Co-Founder of Flexiloans.com:

RBI latest monetary policy decisions are set to significantly benefit MSMEs by maintaining the repo rate at 6.5% and projecting a robust GDP growth of 7.2% for FY25. This reflects strong domestic demand and favorable economic conditions, offering MSMEs expanded market opportunities and financial stability. Additionally, the RBI’s push for digital payments includes integration of UPI Lite into the e-mandate framework to facilitate small-value transactions and allow automatic wallet replenishment when balances fall below set thresholds. This will boost digital payments and reduce transaction costs, thereby enhancing operational efficiency and cash flow management for MSMEs.

The RBI’s policy update provides a stable and supportive outlook for MSMEs and NBFCs. By maintaining the repo rate and projecting higher growth, the RBI reinforces its commitment to fostering a balanced and resilient economic environment. This sets a strong foundation for continued economic development and financial stability, crucial for the growth and success of MSMEs and the broader financial sector.

Sonal Varma, Managing Director and Chief Economist (India and Asia ex-Japan), Nomura:

“The RBI policy decision is largely on expected lines, but with a surprise on the vote split.

Two external MPC members voted for a cut versus one MPC member earlier, which suggests that the divergence within the MPC is growing further. However, we don’t think this is a signal of an impending cut, as the RBI MPC members will have to pivot to swing the needle.

The RBI continues to see the macroeconomic outlook as one of goldilocks, with higher growth and stable inflation. We largely concur with this assessment. The transition from El Nino to La Nina after June should bode well for food price inflation. With lower wage growth and inflation expectations in check, we expect headline inflation to converge with core inflation and average 4.4% in FY25.

We also agree that the RBI does not have to follow the Fed. India has a large cushion of FX reserves, which gives it the space to follow an independent monetary policy by focussing on domestic considerations.

Overall, with growth still strong and uncertainties high both on the global and local front, there is no immediate need for policy easing. However, as inflation settles closer to the target and real rates rise further, we expect some room for easing to open up. We expect the first rate cut in October, with 75bp in cumulative easing in FY25.”

Apurva Sheth, Head of Market Perspectives and Research, SAMCO Securities:

RBI Plays the Game with Domestic Conditions in Mind

The RBI governor decided to buck the trend and stayed away from rate cut like its counterparts in ECB and Central Bank of Canada. No one really expected RBI to cut rates before the Fed but the governor made it a point that he isn’t going to follow the footsteps of Fed and prefer to play the game according to the domestic conditions. The RBI concluded the policy without any rate cuts and emphasized that they remain committed to bringing the inflation down to the target of 4%. The bond yields and stock markets haven’t reacted much as everything the governor said and did was on expected lines.

Anshuman Magazine, Chairman & CEO - India, South-East Asia, Middle East & Africa, CBRE on the RBI’s Repo rate announcement: 

The RBI decision to retain the repo rate at 6.50% signifies a continuity of cautious monetary policy. This prioritizes the objective of achieving an equilibrium between curbing inflationary pressures and nurturing a robust economic environment. Maintaining the status quo of the repo rate is likely to ensure sustained momentum within the real estate sector, thereby benefiting borrowers. Furthermore, the policy decision is expected to contribute to a broader affirmation of consumer confidence.

Aditi Nayar, Chief Economist, Head of Research and Outreach at ICRA:

“The status quo from the MPC was on expected lines, with only the voting change on the stance to 4:2 posing a surprise. Despite this, the 10 year G-sec yield remained above 7%, with the actual start to the rate cut cycle appearing distant.”

Prashant Sharma, President, NAREDCO, Maharashtra:

“We welcome the Reserve Bank of India’s decision to maintain its current policy rates amidst the backdrop of volatile food prices, ongoing geopolitical tensions, and the Federal Reserve’s extended pause on interest rates. Looking ahead, it is crucial for the RBI to continue monitoring the evolving economic landscape, particularly in the aftermath of the Lok Sabha elections and the upcoming Union Budget. The policies and fiscal measures introduced next month will play a significant role in shaping the trajectory of our economy. A balanced and forward-looking approach will be essential to support sustained growth and stability in the real estate sector and the broader economy. We remain optimistic that the RBI, with its vigilant and adaptive stance, will continue to foster an environment conducive to economic resilience and development.”

Anitha Rangan, Economist, Equirus:

“Status Quo for Seventh Time in a Row – Growth gives the elbow room for pause”

“RBI in its 2nd monetary policy for FY25, maintained policy rate at 6.5% as expected and maintaining withdrawal of accommodation. The key takeaway is a) shift in voting pattern from 5-1 to 4-2 (Dr. Ashima Goyal and Prof. Jayant Varma) are likely the dissenters b) Upwards revision in growth for FY25 to 7.2% from 7.0% while keeping inflation unchanged at 4.5% for the year. Overall, the key reason for maintaining policy rate is the uncertainty on the outlook of domestic inflation led by the food side. According to RBI while core inflation is encouraging and at the lowest level in the current series, it is the food inflation that is playing spoilt sport, requiring vigilance. In addition, crude outlook remains uncertain. A reference was also made that external factors are watched for, to see the impact on domestic inflation. Overall, Indian economy is at an inflextion point with inflation on right track but work to be done. The watch is from global side with global last mile inflation remaining arduous and geo-political risks. For Rbi as we have reiterated earlier growth remaining firm, monetary policy has elbow room to focus on price stability. The growth revision only reiterates that RBI is willing to wait and watch – RBI can watch for longer. RBI has the trinity of patience, perseverance and poise to support the economy!.”

In all, the mix of strong growth and above-target inflation does not make a case for a shift to a less restrictive policy setting yet, validating our view that rate easing is not on the cards this year. Political developments are not expected to sway the monetary policy direction or outlook.- Radhika Rao, Executive Director and Senior Economist, DBS Bank

Aspirational Goals for RBI@100 in a Multi-Year Time Frame:

1. Monetary Policy and Liquidity Management

 Positioning the Reserve Bank as Leader of the Global South

 Review of Monetary Policy Framework to address:

 Balancing price stability and economic growth from an Emerging Market Economy (EME) perspective;

 Refinements in monetary policy communication; and

 Spillovers to EMEs from private and public debt overhang in systemically important economies.

2. Globalisation of India’s Financial Sector

 Financial Sector Reforms related to:

 Expanding banking domestically in consonance with national

growth;

 Positioning 3-5 Indian banks among top 100 global banks in terms

of size and operations;

 Deepening and modernisation of financial

markets/institutions/infrastructure; and

 Supporting International Financial Services Centres Authority

(IFSCA) to make GIFT City a leading international financial centre.

3. Making Reserve Bank’s Supervision a Global Model

 Risk Focused Supervision:

 Supervisory culture for effective risk discovery; and

 Ensuring an appropriate compliance culture at Supervised

Entities (SEs).

 Building ‘Through the Cycle’ Risk Assessment Framework by

continuous Horizon Scanning and Holistic Risk Assessment;

 Customer-centric supervision: Improving the conduct of SEs to protect

and promote customers’ interests through appropriate supervisory

focus;

 Effective Corrective Actions: Focus on prudent supervisory judgement

and assessing supervisory effectiveness; and

 Creating a Data Analytics Universe.

4. Deepening and Universalisation of Digital Payment Systems

Domestically and Globally

 Internationalisation of India’s Payment Systems – UPI/RTGS/NEFT;

 Participation in Payment Systems Linkage Projects across countries – bilateral & multilateral;

 Increasing the domestic usage of digital payments – Har Payment Digital; and

 Phased implementation of Central Bank Digital Currency (e - Rupee).

Upasna Bhardwaj, Chief Economist, Kotak Mahindra Bank said, “ RBI’s status quo on rates and stance was in line with market expectations, but the split in voting patterns clearly shows the increasing probability towards a pivot in the policies ahead. However, we believe the robust growth will give enough opportunity for the MPC to remain on a wait and watch mode until better clarity comes from monsoons and quality of expenditure from the Budget. We see room for stance change in the August policy with a plausible easing from October meeting.”

At the moment, the Indian economy is at an inflection point in its path toward greater transformational changes that will bring about more stability and growth, RBI Governor Shaktikanta Das said.

On inflation, we are on the right track, but there is still work to be done, he added.

This is to prevent and mitigate frauds, said the RBI Governor Shaktikanta Das. Introduction of auto replenishment of UPI-like wallet, he added.

The Reserve Bank of India (RBI) is planning to set up a digital payments intelligence platform for sharing data on a real-time basis across digital payment eco-system to safeguard the interest of consumers.

The proposed network-level intelligence platform will boost consumer confidence, said RBI in its bi-monthly Monetary Policy Statement released on Friday.

The central bank has taken a number of measures over the years to deepen digital payments while ensuring their safety and security.

In the midst of changing dynamics of international trade, RBI is planning to rationalise the Guidelines for Export and Import of Goods and Services under Foreign Exchange Management Act (FEMA), 1999.

The central bank will issue draft guidelines soon for feedback from stakeholders, said Shaktikanta Das, Governor, RBI, on Friday.

FPI flows surged to $41.6 bn last year but they were net sellers.

The Reserve Bank of India Governor Shaktikanta Das has red-flagged certain regulated entities in the financial services sector for misusing the freedom to set interest rates and charging fees that are not permitted by the regulator and not disclosing them in the key facts statement (KFS).

In November last year, we had flagged certain certain concerns on excessive growth in unsecured retail loans and over reliance of NBFCs on bank. Recent data suggests that there is some moderation in these loans and advances, said RBI governor Shaktikanta Das. 

The boards and block management of regulated entities should ensure that risk and exposures for each line of business are kept well within their respective risk appetite framework. The persisting gap between credit and deposit growth rates warrants a rethink by the boards of banks, he added. 

NBFCs displayed strong financials, said the RBI Governor Shaktikanta Das. Gross GNPAs of banks, NBFCs are below 3% of total advances at the end of FY24, he added.

RBI to maintain orderliness, stability in all segments of the financial markets, said RBI Governor Shaktikanta Das.

Indian rupee moved in a narrow range in FY25 so far, despite rupee trading under pressure due to FPI outflows, said Reserve Bank of India Governor Shaktikanta Das.

As the economy remains robust, contingent reserve increased to 6.5 per cent of the RBI balance sheet from 6 per cent, said RBI Governor Shaktikanta Das.

Now, there is a view that in matters of monetary policy, the Reserve Bank is guided by the principle of following the Fed, I would like to unambiguously state that while we do keep a watch on whether clouds are building up or clearing out in the distant riser, we play the game according to the local weather and pitch conditions, RBI Governor Shaktikanta Das said.

The second quarter of the financial year 2024-25 will likely see lower inflation due to base effect, said RBI Governor Shaktikanta Das.

According to our projections, the second quarter of 2024 25 is likely to see some connection in headline inflation, but this is likely to be a one-off on account of favorable base effects and may reverse in the third quarter, he added.

GDP projected at 7.2 per cent when realised will be 4th consecutive year of above 7 per cent growth, said RBI Governor Shaktikanta Das.

CPI inflation for 2024-25 is projected at 4.5%; with q1 at 4.9%; q2 at 3.8%; q3 at 4.6%; and q4 at 4.5%, said the RBI Governor Shaktikanta Das.

The GDP growth projection, we have increased it from 7%, which we gave out in the last MPC meeting, has been increased to 7.2%, said the Reserve Bank of India Governor Shaktikanta Das.

The CPI for FY25 projected at 4.5%, said RBI Governor Shaktikanta Das. Normal monsoon CPI projected at 3.5 per cent, he added.

The outlook on crude oil prices remains uncertain due to geopolitical tensions, said RBI Governor Shaktikanta Das.

Some moderation in pulses and vegetables inflation remain in double digits, vegetable prices were high, said RBI governor Shaktikanta Das.

GDP growth for Q1 at 7.3%; Q2 at 7.2%; Q3 at 7.3% and Q4 at 7.2%.

Healthy balance sheets of banks and corporates; Governments continue thrust on capex, high capacity utilization and business optimism auger well for investment activity, said Shaktikanta Das.

The forecast of above normal southwest monsoon by the Indian meteorological department, is expected to boost kharif production, said RBI Governor Shaktikanta Das..

The GDP growth is expected at 7.2% for FY24, said RBI Governor Shaktikanta Das.

FY24 ended on a high note for the economy, with GDP growing at 8.2 per cent against 7 per cent in FY23. 

The six-member rate setting committee also persisted with its “withdrawal of accommodation” stance to ensure that inflation progressively aligns to the target, while supporting growth. 

Equity markets and gold prices gained in both advanced and emerging market economies since the last MPC meeting in April.

Central banks remain steadfast and data dependent in their fight against inflation, Guv added.

Monetary policy should continue to be disinflationary, said Guv Shaktikanta Das.

Monetary policy must continue to remain disinflationary and we are resolute in our commitment to aligning inflation to the target of 4%, he added.

Withdrawal of accommodation to ensure that inflation progressively aligns with the target while supporting growth, said the Governor.

After detailed assessment of the evolving microeconomic and financial development and the outlook the MPC decided by a 4 is to 2 majority to keep the policy repo rate at 6.5%, says RBI Governor Shaktikanta Das.

Shashanka Bhide, Rajiv Ranjan, Michael Debabrata Patra and Shaktikanta Das voted to keep the policy repo rate unchanged at 6.50 per cent. Ashima Goyal and 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 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.

The Reserve Bank of India’s Monetary Policy Committee (MPC) kept the repo rate unchanged at 6.5% in its first meeting since Lok Sabha Elections 2024. RBI decided to hold the key policy rate for the eighth consecutive time in its June 2024 meeting. The MPC had last changed the benchmark interest rate in February 2023.

In recent years, the world has gone through one crisis after another. And the pattern continues. Against this backdrop, the Indian economy looks strong, says RBI Guv.

To watch the Reserve Bank of India’s Governor Shaktikanta Das’ complete monetary policy statement click here.

“The Monetary Policy Committee is likely to maintain the status quo on the Reserve Bank of India’s key lending rate amid the continuing need to bring down inflation further, even as economic activity remains strong. All economists polled expect the MPC to hold the Reserve Bank of India’s repo rate steady at 6.5%. This will be the first RBI policy after the Lok Sabha election results 2024,” said Devarsh Vakil, Deputy Head of Retail Research at HDFC Securities.

RBI Governor’s commentary on inflation and future interest rate cut trajectory will drive the markets in the near term, he added.

Crude oil futures traded higher on Friday morning as Saudi Arabia and Russia announced that they can pause or reverse voluntary production output increases if they find market is not strong enough.

Rupee is expected to open broadly unchanged on Friday, holding near to a key level and awaiting the Reserve Bank of India’s monetary policy decision and the US non-farm payroll report.

Domestic markets are expected to open on a flat note on Friday. Nifty futures is currently ruling at 22910 in Gift City as against Thursday’s value of 22,900 at the NSE. Analysts expect the market to move in a narrow range after election-triggered volatility. Analysts said the focus is now shifted to RBI monetary policy outcome.

Indian government bond yields are expected to move largely unchanged in the early session on Friday as market participants await the Reserve Bank of India’s monetary policy decision later in the day.

Bolstered by strong growth in manufacturing, the Indian economy expanded at a rapid 7.8 per cent in January-March (Q4 of FY24), surpassing expectations and pushing up the growth rate for fiscal year 2023-24 (FY24) to 8.2 per cent, Statistics Ministry reported.

The Reserve Bank of India’s Monetary Policy Committee’s April 2024 highlights can be read here.

The Reserve Bank of India’s Monetary Policy Committee’s February 2024 highlights can be read here.

The Reserve Bank of India’s Monetary Policy Committee’s December 2023 highlights can be read here.

Reserve Bank of India (RBI), is unlikely to cut the benchmark interest rate, at its upcoming monetary policy review meeting, taking place soon after the announcement of the Lok Sabha election results, amid inflation challenges, said experts. (PTI)

The Reserve Bank of India (RBI) on Tuesday absorbed surplus liquidity aggregating ₹44,430 crore through two variable rate reverse repo (VRRR) auctions of three days tenor. The aforementioned amount was deployed by banks even as the central bank was ready to absorb a total of ₹1-lakh crore (notified amount).

Retail inflation in the country hit an 11-month low in April 2024 at 4.83 per cent, slightly lower than the March 2024 print of 4.85 per cent.

The latest consumer price index (CPI)-based inflation print is, however, higher than the April 2023 level of 4.70 per cent, data released by the Ministry of Statistics & Programme Implementation (MOSPI) showed.

A durable alignment with the 4 per cent headline inflation target may re-commence only in the second half of the year and sustain till numbers closer to the target are sighted during the course of 2025-26, according to an article in RBI’s latest monthly bulletin.

The outlook for the Indian economy remains bright, but increasing incidence of climate shocks imparts considerable uncertainty to the food inflation and overall inflation outlook, according to the Reserve Bank of India (RBI).

Foreign banks expect the RBI’s six-member Monetary Policy Committee (MPC) to maintain status quo on interest rates while remaining cautious on inflation.

The Reserve Bank of India’s Monetary Policy Committee (MPC) is likely to leave the policy repo rate unchanged at its upcoming meeting due to robust growth momentum even as it keenly awaits retail inflation to move to the 4 per cent target on a durable basis.