RBI MPC Highlights: Repo Rate Remains Unchanged At 6.5%; Check Here Other Key Details

In a significant move, the MPC has reduced the Cash Reserve Ratio (CRR) by 50 basis points, bringing it down to 4 per cent. This reduction will help inject liquidity into the banking system

RBI MPC Meeting 2024: The Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC), chaired by Governor Shaktikanta Das, wrapped up its three-day review meeting on Friday. The committee decided to maintain the repo rate at 6.5 per cent with a 4:2 majority, marking the eleventh consecutive meeting with no change. The MPC is composed of three RBI members and three external members. This was the last MPC meeting of the fiscal year 2024-25.

Monetary Policy Decision Highlights

Repo Rate: The RBI has decided to keep the policy repo rate unchanged at 6.50 per cent under the liquidity adjustment facility (LAF). The standing deposit facility (SDF) rate remains at 6.25 per cent, while the marginal standing facility (MSF) rate and the Bank Rate stay at 6.75 per cent. 

The MPC has maintained a neutral stance on monetary policy, focusing on balancing inflation control and promoting growth. The committee aims to achieve a 4 per cent Consumer Price Index (CPI) inflation target, with a margin of ±2 per cent, to ensure price stability and sustainable economic growth.

GDP Growth Outlook: The RBI projects Real GDP growth at 6.6 per cent for FY 2024-25, with Q3 growth at 6.8 per cent, Q4 at 7.2 per cent, and H1 2025-26 at 6.9 per cent for Q1 and 7.3 per cent for Q2.

Inflation Outlook: CPI inflation rose to 6.2 per cent in October, driven by higher food prices and rising core inflation. However, food inflation is expected to ease in Q4, helped by seasonal drops in vegetable prices, the Kharif harvest, and favourable rabi conditions. 

The RBI projected CPI inflation for FY 2024-25 at 4.8 per cent, with Q3 at 5.7 per cent, Q4 at 4.5 per cent, and H1 2025-26 at 4.6 per cent (Q1) and 4.0 per cent (Q2). The RBI assesses that risks to both growth and inflation are balanced.

Cash Reserve Ratio: In a significant move, the MPC has reduced the Cash Reserve Ratio (CRR) by 50 basis points, bringing it down to 4 per cent. This reduction will help inject liquidity into the banking system. 

Additionally, the RBI has raised the interest rate ceilings on Foreign Currency Non-Resident Bank (FCNR-B) deposits, effective immediately, to attract more foreign capital inflows into the country. Despite a decline in Foreign Portfolio Investment (FPI) inflows to Emerging Market Economies (EMEs) in October, India has seen net FPI inflows of $9.3 billion in FY25 so far.

Collateral-Free Agricultural Loans: RBI has also announced an increase in the limit for collateral-free agricultural loans to Rs 2 lakh per borrower, up from the previous limit of Rs 1.6 lakh. This move comes in response to the rising inflation and the increasing costs of agricultural inputs over the years. The original limit was set at Rs 1 lakh in 2010 and was revised to Rs 1.6 lakh in 2019.

Mule-Hunter AI: The RBI launched a new tool, Mule-Hunter AI, designed to detect and prevent mule accounts.

Podcasts: The RBI introduced podcasts as a new communication medium to engage with the public.