The Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) in its second bi-monthly monetary policy meeting of FY24 decided to leave the repo rate unchanged at 6.5%. The MPC voted 5 members to 1 to remain focused on withdrawal of accommodation. The RBI also retained FY24 GDP growth forecast at 6.5%, while expects FY24 CPI inflation to be at 5.1%.
RBI continues to adopt a liberal approach
Atul Kumar Goel, MD and CEO of Punjab National Bank (PNB):
RBI continues to adopt a liberal approach towards BBPS by streamlining its processes to bring more competence and boost involvement. Further, action on internationalizing RuPay Debit Cards and Pre paid Cards points to RBI’s earnest approach on broad-basing the scope of the cards and increasing comfort for Indians travelling abroad.
Overall it seems to be an action oriented policy with evenly balanced approach. However, in view of the dynamic world economic scenario, we anticipate that RBI will remain watchful.
Sensex, Nifty trade lower dragged by IT, Auto stocks
The Indian equity market erased early gains to trade lower Thursday afternoon after the Reserve Bank of India delivered a ‘hawkish pause’ in its bi-monthly monetary policy review. The RBI kept the repo rate unchanged at 6.5%, but the policy statement by Governor Shaktikanta Das signaled that one should not expect a rate cut soon, flagging inflation concerns.
The Sensex declined 170.44 points, or 0.27%, to 62,972.52, while the Nifty traded 63.10 points, or 0.34%, lower at 18,663.30.
RBI Monetary Policy Live | Do not expect rate cut through FY24, says Indranil Pan of Yes Bank
There was nothing in the policy that was not expected by the market, rates and the stance both were unchanged. However, the communication, in my opinion, was slightly on the hawkish side with respect to inflation.
Even as there was a 10 bps reduction in the inflation forecast for FY24, the governor was extremely pointed in highlighting that the MPC is now focused on getting inflation down to the 4% central line, rather than being comfortable with the fact that headline inflation is currently within the tolerance band and is likely to remain so for the rest of FY24.
The governor also pointed out that in H2FY24, the inflation is expected to be higher, averaging at around 5.3%, and a much closer look on the inflation at that point is warranted as by then any negative impact from the El Nino will be clear. Currently, the RBI has assumed a normal monsoon in the inflation projections.
The communication in this policy settles the fact that one should not expect any reduction in the policy rate soon, may be even through the rest of FY24, says Indranil Pan, Chief Economist, Yes Bank.
RBI Monetary Policy | Repo rate unchanged, cut in CPI forecast: Key highlights
– Monetary Policy Committee (MPC) keeps the repo rate unchanged at 6.5%.
– Standing Deposit Facility Rate remains at 6.25%. Marginal Standing Facility Rate and Bank Rate are unchanged at 6.75%.
– All the members of the MPC unanimously voted to keep the policy repo rate unchanged at 6.5% for the second time. The MPC voted 5 members to 1 to remain focused on withdrawal of accommodation.
-RBI projected CPI inflation for FY24 at 5.1%. Breaking down inflation projections every quarter, RBI predicted inflation at 4.6% for Q1FY24, 5.2% at Q2FY24, 5.4% at Q3FY24, and 5.2% at Q4FY24.
– FY24 GDP growth rate forecast retained at 6.5%. On a quarterly basis, the GDP growth rate projected at 8% in Q1FY24, 6.5% in Q2FY24, 6% in Q3FY24, and 5.7% in Q4FY24.
– Reserve Bank will remain nimble in liquidity management, RBI to ensure orderly completion of govt. Market borrowing program in the stipulated time.
-RBI also allowed banks to issue Rupay prepaid forex cards. With this, the RBI also announced to expand the scope of the e-rupee voucher. To let this happen, non-bank companies would be able to issue such instruments on their own.
RBI Monetary Policy | MPC’s decision relief for MSME borrowers, says Rajesh Sharma of Capri Global Capital
.Today’s announcements by RBI to keep the repo rate unchanged after a total 250 bps increment since May 2022 is an encouraging sign to keep the positive sentiment of borrowers and would give a big boost to demand for credit appetite. It will help to stabilize the interest rate cycle. There will be a collective sigh of relief from homeowners since they have been feeling the strain of increased interest rates and longer loan terms.
The pause in the rate cycle will also aid relief for MSME borrowers who are yet to recover from the pandemic stress and higher cost of borrowing. We believe RBI is evaluating trends in inflation and the movement of high-frequency indicators and global developments like a hawk to exercise a measured approach during this period in order to pave the way for sustainable economic growth and stability in the long run, says Rajesh Sharma, MD, Capri Global Capital.
RBI Monetary Policy | Home loan interest rates to remain steady, says Dhruv Agarwala
In line with industry expectations, the RBI has maintained a status quo on its benchmark lending rate. With this, the repo rate will be maintained at 6.5%. This augurs particularly well for the real estate sector in the country. Amid all growth indicators moving in the right direction, the consumer spirit would get a renewed boost from the RBI move, which means home loan interest rates would remain at the current level, said Dhruv Agarwala, Group CEO, Housing.com, PropTiger.com & Makaan.com
RBI Monetary Policy | Rajani Sinha, Chief Economist, CareEdge Ratings
While the RBI decided to keep the policy rates unchanged for the second consecutive meeting, it has continued to emphasize on bringing the retail inflation closer to the target of 4%. Amid a volatile global economic scenario and lingering risks to domestic inflation, it is prudent that the RBI has followed a wait-and-watch strategy.
While RBI has marginally lowered the CPI inflation projection for FY24 to 5.1%, it has emphasized on the inflationary risks. The policy stance on ‘withdrawal of accommodation’ is reflective of RBI’s guarded approach towards inflation as it reiterated that inflation remains above target and remaining within the tolerance band is not enough.
Going ahead, with the domestic growth holding up well, we have raised our GDP growth projection to 6.5% for FY24 (from previous projection of 6.1%). With concerns on growth front abating and CPI inflation likely to remain above the 4% target, we expect a status quo on the policy rates in 2023.
Exchanging ₹2,000 notes: ‘No panic, no rush, just avoid…,’ says RBI Governor Shaktikanta Das
During the RBI’s bi-monthly monetary policy meeting on Thursday (8 June), Governor Shaktikanta Das appealed to citizens not to wait for the September 30th deadline for exchanging/ depositing ₹2,000 currency notes and added not to panic either. “Please avoid the last-minute rush in exchanging or depositing ₹2,000 notes. There is no shortfall in currency, we have ample notes for exchange. Don’t panic, no rush, but don’t keep it for the last days of September,” RBI governor Das said.
Reference Link:- https://www.livemint.com/economy/rbi-monetary-policy-live-rbi-to-announce-monetary-policy-today-likely-to-hold-repo-rate-at-65-11686135649418.html