RBI Monetary Policy Highlights 8th Feb, Check most important points

On Thursday, the Governor of the Reserve Bank of India (RBI), Shaktikanta Das, conducted the Monetary Policy Committee (MPC) meeting and announced that the RBI has decided to maintain the key policy rates unchanged. These announcements from the RBI MPC followed the presentation of the interim Budget by Union Finance Minister Nirmala Sitharaman in Parliament on February 4.

Policy Rates

Policy Repo Rate	6.50%
Standing Deposit Facility Rate	6.25%
Marginal Standing Facility Rate	6.75%
Bank Rate	6.75%
Fixed Reverse Repo Rate	3.35%

The Monetary Policy Committee of the Reserve Bank of India has opted to keep the policy repo rate steady at 6.5%. In the final meeting of FY24, the six-member committee, with a 5:1 majority, voted to maintain the current repo rate due to persistent retail inflation exceeding the 4% target. This marks the sixth consecutive meeting where the MPC has chosen to maintain the status quo on the repo rate, which is the interest rate at which banks access funds from the RBI to address short-term liquidity imbalances.

The Consumer Price Index (CPI) for FY24 is forecasted at 5.4%, while it is expected to be 4.5% in FY25. The RBI has set the real GDP growth for FY25 at 7%. Regarding the Paytm issue, RBI Governor Shaktikanta Das stated that the central bank has been in discussions with Paytm for a considerable period, emphasizing that all regulatory actions are aimed at ensuring systemic stability and protecting the interests of customers.

RBI Monetary Policy Highlights

• Benchmark interest rate or repo rate kept unchanged at 6.5%
• GDP growth for FY25 projected at 7%, lower than 7.3% this fiscal
• Retail inflation to average 5.4% this fiscal, to come down to 4.5% in FY25
• Monetary transmission by financial institutions still remains incomplete
• Current economic momentum to sustain in the next fiscal
• Recovery in rabi sowing, sustained profitability in manufacturing, resilience of services to support economic activity in FY25
• Investment cycle gaining steam, signs of revival in private sector capex
• Indian economy making confident progress on strong, sustained growth path
• Rural demand continues to gather pace, urban consumption remains strong
• Govt adhering to fiscal consolidation path; domestic economic activity strong
• Uncertainty in food prices continue to impinge on headline inflation
• Increasing geopolitical tensions are impacting supply chain, putting pressure on commodity prices
• Forex reserve at $622.5 billion; comfortable for meeting foreign obligations
• Domestic financial system remains resilient with a healthy balance sheet
• Regulated entities should accord highest priority to compliance, consumer interest protection
• RBI to introduce an offline functionality in CBDC-Retail for transactions in areas with poor or limited internet connectivity.
• Exchange rate of Indian rupee remained fairly stable in the current fiscal
• RBI will review regulatory framework for electronic trading platforms to enable market makers access offshore ETPs offering permitted Indian Rupee products
• RBI asked lenders to provide key fact statement (KFS) about the terms of the loan agreement, including all-inclusive interest cost, to borrowers for retail as well as MSME loans
• Next monetary policy committee (MPC) meeting scheduled during April 3-5, 2024.

What RBI said on Paytm?

• Sufficient time is given to take corrective actions. Restrictions are proportionate to the gravity of situation.
• When such constructive engagement does not work, we go for imposing supervisory/ business restrictions
• All our actions are in the best interest of systemic stability and customer interest
• Individual entities should be mindful of these aspects for their long-term success
• RBI will issue FAQ next week on supervision related queries
• RBI will continue to support innovation in the fintech space
• We have been engaged with Paytm for quiet some time