RBI MPC October 2024: The RBI MPC on Wednesday, October 9, kept the key repo rate unchanged for the 10th consecutive time at 6.5 per cent, with a 5:1 majority. The RBI MPC decided unanimously to change the stance to ‘neutral’ and “to remain unambiguously focussed on a durable alignment of inflation with the target while supporting growth”.
The RBI also kept FY25 GDP projection unchanged at 7.2 per cent, while also keeping the FY25 inflation forecast same at 4.5 per cent.
Earlier, the RBI MPC had a stance of the ‘withdrawal of accommodation’. The latest stance of ‘neutral’ is expected to be seen as a hint for a rate cut in December 2024.
While announcing the latest bi-monthly monetary policy statement on October 9, RBI Governor Shaktikanta Das said, “Prevailing and expected inflation, growth balance have created congenial condition for change in monetary policy stance to ‘neutral’.”
RBI Status Quo on Repo Rate, SDF, MSF, CRR, SLR
The RBI’s monetary policy committee in its fourth bi-monthly monetary policy on October 9 kept the repo rate unchanged for the 10th time in a row, at 6.5 per cent. The RBI MPC also kept the SDF unchanged at 6.25 per cent, and MSF and Bank Rates maintained at 6.75 per cent. The SDF is the lower band of the interest rate corridor, while the MSF is the upper band.
The reverse repo rate stands at 3.35 per cent.
The repo rate is the rate at which the RBI lends money to the commercial banks, whereas the reverse repo rate on commercial banks’ deposits with the RBI.
The cash reserve ratio (CRR) stands at 4.5 per cent and the statutory liquidity ratio (SLR) stands at 18 per cent.
The RBI has maintained status quo on benchmark interest rate since February 2023.
FY25 GDP Growth Projection Remains at 7.2%
The RBI on Wednesday also kept the GDP growth projection for the current financial year 2024-25 unchanged at 7.2 per cent.
“Real GDP growth for 2024-25 is projected at 7.2 per cent, with Q2 at 7.2 per cent; Q3 at 7.4 per cent; and Q4 at 7.4 per cent. Real GDP growth for Q1:2025-26 is projected at 7.3 per cent,” the RBI governor said in his monetary policy statement.
It means that the growth projections have been raised for FY25 Q3, FY25 Q4 and FY26 Q1, while that for FY25 Q2 has been lowered amid global uncertainties, as compared to the previous August 2024 policy..
FY25 CPI Inflation Unchanged at 4.5%
RBI Governor Shaktikanta Das also kept the CPI inflation for 2024-25 same at 4.5 per cent.
He, however, said food inflation pressures could see some easing later in the FY. The RBI governor said the retail inflation in September is likely to see big jump due to unfavourable base and a pick-up in food price momentum.
The RBI is mandated to keep the retail inflation at 4 per cent (with a flexibility of 2 per cent up or down).
Das said, “CPI inflation for 2024-25 is projected at 4.5 per cent, with Q2 at 4.1 per cent; Q3 at 4.8 per cent; and Q4 at 4.2 per cent. CPI inflation for Q1:2025-26 is projected at 4.3 per cent.”
It means that the CPI inflation targets have been revised lower for FY25 Q2, FY23 Q4, and FY26 Q1, while raising the target for FY25 Q3, as compared to the previous August 2024 policy.
Additional Measures by RBI
UPI Limits Raised
The RBI on Wednesday decided to increase the per-transaction limit in UPI123Pay from Rs 5,000 to Rs 10,000; and raise the UPI Lite wallet limit from Rs 2,000 to Rs 5,000 and per-transaction limit from Rs 500 to Rs 1,000.
“UPI has transformed India’s financial landscape by making digital payments
accessible and inclusive through continuous innovation and adaptation. To further encourage wider adoption of UPI and make it more inclusive, it has been decided to (i) enhance the per-transaction limit in UPI123Pay from Rs 5,000 to Rs 10,000; and (ii) increase the UPI Lite wallet limit from Rs 2,000 to Rs 5,000 and per-transaction limit from Rs 500 to Rs 1,000,” RBI Governor Shaktikanta Das said.
MSE Loan Foreclosure Guidelines
Banks and NBFCs are not permitted to levy foreclosure charges/ pre-payment penalties on any floating rate term loan sanctioned to individual borrowers for purposes, other than business.
“It is now proposed to broaden the scope of these guidelines to include loans to Micro and Small Enterprises (MSEs),” Das said. A draft circular in this regard shall be issued for public consultation.
Discussion Paper on Fundraising Avenues for UCBs
The RBI will issue a discussion paper on capital raising avenues for UCBs for feedback and suggestions from stakeholders. This will be aimed to provide more flexibility and avenues for UCBs to raise capital.
“The Reserve Bank has undertaken several initiatives in recent years to
strengthen the Urban Co-operative Banking (UCB) Sector. Such initiatives include issuance of regulatory guidelines in 2022 for issue and regulation of share capital and securities by UCBs,” the RBI governor added.
Reserve Bank Climate Risk Information System to be Set Up
Climate change is emerging as a significant risk to the financial system world over. This makes it necessary for regulated entities to undertake robust climate risk assessment, which is sometimes hindered by gaps in high quality climate related data.
“To bridge these data gaps, the Reserve Bank proposes to create a data repository, namely, the Reserve Bank – Climate Risk Information System (RB-CRIS),” Shaktikanta Das said.
Introduction of Beneficiary Account Name Look-up Facility
Currently, UPI and Immediate Payment Service (IMPS) provide a facility for
the remitter of funds to verify the name of the receiver (beneficiary) before executing a payment transaction.
The RBI proposes to introduce such a facility for the Real Time Gross Settlement System (RTGS) and the National Electronic Funds Transfer (NEFT)
system, the RBI governor announced on Wednesday.
This facility will enable the remitter to verify the name of the account holder before effecting funds transfer to him/her through RTGS or NEFT. This will also reduce the possibility of wrong credits and frauds, he said.
This was the first meeting of the reconstituted MPC. The three newly appointed external members are Ram Singh, Saugata Bhattacharya and Nagesh Kumar. The MPC was reconstituted by the government last month.
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