The Reserve Bank of India's Monetary Policy Committee, defying analysts' predictions, on Thursday decided to pause the repo rate hike and kept it unchanged at 6.5 per cent.  MPC unanimously decided to keep the policy rate unchanged. The call to pause is for this meeting only, Governor Shaktikanta Das said. 


"Looking ahead, headline inflation is projected to moderate in 2023-24. The monetary policy actions taken since May 2022 are still working through the system. Accordingly, the MPC decided to keep the policy rate unchanged to assess the progress made so far, while closely monitoring the evolving inflation outlook. The MPC will not hesitate to take further action as may be required in its future meetings.," Das said in its statement.


In a bid to contain inflation, the RBI has already increased the repo rate by a total of 250 basis points since May 2022. However, inflation has continued to remain above the RBI's comfort zone of 6 per cent most of the time. 


These repo rate hikes were preceded by the introduction of a standing deposit facility (SDF). The governor in his speech said, "To recapitulate the actions taken so far, we have increased the policy repo rate cumulatively by 250 bps in the last 11 months starting May 2022. This was preceded by the introduction of the Standing Deposit Facility (SDF) at a rate 40 bps higher than the fixed rate reverse repo. Thus, the effective rate hike since April last year has been 290 bps."


"When we started the rate cut cycle in February 2019 to provide support to growth, the CPI inflation was around 2 per cent2 and the policy repo rate was 6.50 per cent. Now, the policy rate is 6.50 per cent but inflation is 6.4 per cent (February 2023). Overall, inflation is above the target and given its current level, the present policy rate can still be regarded as accommodative. Hence, the MPC decided to remain focused on withdrawal of accommodation," Das added further. 


Other than repo rate and inflation RBI MPC in Apil gave a number of forecasts and estimates for the FY24.  


Following are the highlights of RBI monetary policy statement:



  • The benchmark lending rate has been kept unchanged at 6.50 per cent. RBI said that Looking ahead, headline inflation is projected to moderate in 2023-24. The monetary policy actions taken since May 2022 are still working through the system. Accordingly, the MPC decided to keep the policy rate unchanged to assess the progress made so far, while closely monitoring the evolving inflation outlook. The MPC will not hesitate to take further action as may be required in its future meetings, the RBI Governor. 

  • RBI projected 6.5 per cent economic growth for 2023-24, better than the 6.4 per cent projected in February. RBI said, looking ahead, the higher rabi production has brightened the prospects for the agriculture sector and rural demand. The steady growth in contact-intensive services should be positive for urban demand. The government’s focus on capital expenditure, capacity utilisation above the long-period average, and moderating commodity prices should bolster manufacturing and investment activity. T

  • Inflation is forecast to be 5.2 per cent in 2023-24, against 5.3 per cent estimated in February. The central bank said there is already evidence of a correction in wheat prices in March on supply-side interventions by the government. The impact of the recent unseasonal rains in some parts of the country, however, needs to be watched, it added. 

  • The rising uncertainty in international financial markets and imported inflation pressures need to be monitored closely, RBI cautioned.  

  • RBI said that the fight against inflation is far from over, the inflation outlook dynamic amid the sudden announcement of crude output cut by OPEC+  War against inflation has to continue until RBI sees a durable decline in inflation closer to the target. The expectation of a record Rabi harvest bodes well for easing food price pressures, milk prices are likely to remain firm going into the summer season due to tight demand-supply balance and fodder cost pressures

  • RBI also said that regulators need to identify potential vulnerabilities and take proactive regulatory and supervisory measures. Institutions should exercise due diligence in risk management, and corporate governance practices; pay close attention to asset-liability mismatches, and build up adequate capital buffers. 

  • RBI keeping a close watch on the banking sector turmoil in some developed countries. Das said that the global economy is now
    witnessing a renewed phase of turbulence with fresh headwinds from the banking sector turmoil in some advanced economies. Bank failures and contagion risk have brought financial stability issues to the forefront.

  • Amidst this volatility, the banking and non-banking financial service sectors in India remain healthy and financial markets have evolved in an orderly manner, he added.

  • The sudden announcement of an output cut by OPEC+ a few days ago and the resultant jump in crude oil prices is yet another evidence of this volatility, the governor noted. 

  • RBI will set up centralised portal for the public to search unclaimed deposits in multiple banks. RBI said in order to improve and widen the access of depositors/beneficiaries to information on such unclaimed deposits, it has been decided to develop a web portal to enable search across multiple banks for possible unclaimed deposits. This will help depositors/beneficiaries in getting back unclaimed deposits. 

  • RBI announced the operation of pre-sanctioned credit lines at banks through the unified payments interface (UPI). The governor during his speech said this initiative will encourage innovation. Highlighting that RuPay credit cards were permitted to be linked to UPI, he said that the new proposal to permit the operation of pre-sanctioned credit lines at banks via UPI will encourage innovation.

  • The Governor said that the Current Account Deficit (CAD) is expected to remain moderate in Q4 of FY23 and in FY24 at a level that is both viable and eminently manageable.

  • The next meeting of the RBI monetary policy committee is scheduled for June 6-8.