RBI MPC announcements: Reserve Bank of India Governor Shaktikanta Das lowered GDP growth estimate for FY25, while increasing inflation forecast. Das kept the repo rates unchanged while adopting a neutral stance. Das, in the last monetary policy committee meeting of the year, highlighted the challenges Indian as well as the global economy faced in the current year.
Governor Das, in his announcement also cut the cash reserve ratio (CRR) by 50 basis points to 4 per cent.
He also agreed that the GDP growth rate of the second quarter at 5.4 per cent was much lower than expected. The RBI MPC had estimated the second quarter to grow at 7 per cent.Â
Here’s a lowdown of what RBI Governor Shaktikanta Das announced:
1. The repo rate was kept unchanged by the RBI at 6.5 per cent. The RBI will continue with a neutral monetary policy stance, he said.Â
2. GDP growth estimate for 2024-25 was lowered to 6.6 per cent from the earlier estimates of 7.2 per cent. GDP growth in Q3 is estimated to be 6.8 per cent, and Q4 7.2 per cent. Growth in the Q1 of next year is estimated to be 6.9 per cent, and Q2 at 7.3.Â
3. Das acknowledged that the Q2 growth of 5.4 per cent was far less than what was estimated due to weaknesses in the manufacturing sector. The MPC had estimated Q2 growth to be at 7 per cent.Â
4. The RBI pegged CPI inflation at 4.8 per cent for FY25 from the earlier estimate of 4.5 per cent. He underlined persistent challenges in balancing inflation and growth.Â
5. Das announced that the CRR has been slashed by 50 basis points to 4 per cent which will inject Rs 1.16 lakh crore into the banking system. He said that the reduction will be implemented in two tranches of 25 basis points each starting December 14.Â
6. The apex bank also decided to increase the interest rate ceilings on Foreign Currency Non-Resident Bank [FCNR(B)] deposits. Banks have been permitted to raise fresh FCNR(B) deposits of 1 year to less than 3 years maturity at rates not exceeding ARR plus 400 bps. For maturity between 3-5 years, rates can be hiked to not exceeding ARR plus 500 bps.Â
7. The RBI proposed the linking of FX-Retail platform with Bharat Connect, enabling users to register and transact on the platform through apps of banks and non-bank payment system providers.Â
8. The central bank proposed developing a benchmark based on the secured money markets (both basket repo and TREP) – the Secured Overnight Rupee Rate (SORR).Â
9. RBI has decided to raise the limit for collateral-free agriculture loans from Rs 1.6 lakh to Rs 2 lakh per borrower.
10. The apex bank proposed permitting small finance banks (SFBs) to extend pre-sanctioned credit lines through the UPI, for which the guidelines would be issued shortly.