On Friday, Reserve Bank of India (RBI) Governor Shaktikanta Das announced the first monetary policy for the fiscal year 2024-25. The two-day review meeting of the RBI’s Monetary Policy Committee (MPC), the rate-setting panel, began on April 3 and ended today, April 5. For the sixth time in a row, the RBI decided to remain at the key policy repo rate at 6.5%. The six-member MPC, led by Governor Das, also resolved to uphold the policy of ‘removal of accommodation’. The Reserve Bank of India expects India’s real GDP to expand by 7% in FY25. The CPI inflation rate is expected to be 4.5% in fiscal year 25.
RBI Governor Shaktikanta Das released the first monetary policy for fiscal year 25.
Here are the main highlights of RBI’s April policy:
Policy Measurements:
The repo rate remained steady at 6.5%.
The policy attitude of ‘removal of accommodation’ maintained the FY25 GDP growth projection at 7%.
The quarterly estimates are: Q1 at 7.1%, Q2 at 6.9%, Q3 at 7%, and Q4 at 7%.
The CPI inflation projection for FY25 is 4.5%.
Here are the detailed inflation forecasts: Q1: 4.9%; Q2: 3.8%; Q3: 4.6%; Q4: 4.5%.
Non-Policy Measures:
To be disclosed is the plan for trading sovereign green bonds at the IFSC.
launch of a mobile application to use RBI’s Retail Direct Scheme for GSec market participation
A draft circular for banks’ LCR framework will soon be released.
Handling products derived from the rupee interest rate for all small finance institutions
Allowing Prepaid Payment Instruments (PPIs) to be accessed through third-party applications using UPI for Cash Deposit Facilities
CBDC distribution via non-bank payment system providers
Key takeaways from the RBI MPC conclusion include rates staying the same and a promising growth outlook.
Governor Shaktikanta Das of the Reserve Bank of India (RBI) reaffirmed on Friday, April 5, as anticipated, that the key policy repo rate would remain at 6.5%. Given India’s robust economic growth and persistent inflation, the majority of analysts and economists anticipated that the RBI will keep to its policy rate and attitude. Food costs continue to be a concern, and the RBI is committed to lowering inflation to less than 4%.
Non-bank Payment System Operators distribute CBDC
There are currently more use cases and participating institutions in the Central Bank Digital Currency (CBDC) pilot programs. The idea is to allow non-bank payment system operators to offer CBDC wallets, hence expanding the customer base for CBDC-Retail. According to RBI Governor Das, this will also make it easier to test how resilient the CBDC infrastructure is to manage multi-channel transactions.
Cash deposits via UPI; IFSC trading of sovereign green bonds
The RBI suggested using UPI for cash deposits at cash deposit machines to streamline cash processing at banks. The governor of the RBI added that the IFSC will receive notifications about trade and investing in sovereign green bonds.
Mobile application for Retail Direct Scheme.
In order to participate in the G-sec market, RBI Governor Shaktikanta Das announced the creation of a mobile application enabling access to the RBI’s Retail Direct Scheme.
Banks and NBFCs must put great importance to regulatory guidelines:
Asserting that excellent governance and compliance with regulations are top priorities for banks, non-bank financial companies, and other financial organizations, RBI Governor Shaktikanta Das highlights the significance of financial stability for all stakeholders and stresses that maintaining financial stability is a shared duty.
RBI Governor Shaktikanta Das highlighted the need for CPI inflation to reduce and align with the objective on a long-term basis, claiming that the elephant of inflation has gone for a walk and the mission remains unfinished.
The RBI expects CPI inflation to be 4.5% in fiscal year 2025.
The RBI expects India’s CPI-based retail inflation to be 4.5% in fiscal year 25.
Here are the detailed inflation forecasts: Q1FY25: CPI forecasts reduced to 4.9% from 4.5% previously.
Q2 FY25: CPI forecasts reduced to 3.8% from 4% previously.
Q3FY25: CPI forecasts remain constant at 4.6%.
Q4FY25: CPI projections reduced to 4.5% from 4.7% previously.
The RBI forecasts a 7% real GDP growth rate in FY25.
The Reserve Bank of India expects India’s real GDP to expand by 7% in FY25.
Here are the detailed GDP growth targets: Q1FY25 GDP growth forecast reduced to 7.1% from 7.2% before.
Q2FY25 GDP growth target increased to 6.9% from 6.8% previously.
Q3FY25 GDP growth target remains steady at 7%. Q4FY25 GDP growth target increased to 7% from 6.9% previously.
CPI inflation for FY25 is anticipated at 4.5%.
The RBI expects India’s CPI inflation to be 4.5% in fiscal year 25.
Q1FY25: 4.9%
Q2FY25: 3.8%
Q3FY25: 4.6%
Q4FY25: 4.5%
FY25 GDP growth is predicted at 7%.
The Reserve Bank of India (RBI) forecasted India’s real GDP growth rate for FY25 at 7%. sa
Look at major policy rates: Here are the important policy rates currently:
Repo rate: 6.5%.
Standing Deposit Facility Rate: 6.25%.
Marginal Standing Facility Rate: 6.75 percent Bank rate: 6.75 percent.
Fixed Reverse Repo Rate: 3.35 percent
Core inflation has steadily dropped, observed RBI Governor Das.
Core inflation fell steadily. Maintain the target inflation rate of 4% and expect inflation to rise. Governor Shaktikanta Das stated that the MPC must be ‘actively disinflationary’.
MPC votes by a 5:1 majority to retain the status quo on rates.
The RBI’s Monetary Policy Committee (MPC) voted 5:1 to leave benchmark rates unchanged at 6.5%. RBI Governor Shaktikanta Das also reiterated the policy stance of ‘withdrawal of accommodation’.
RBI Governor Shaktikanta Das maintains benchmark repo rate at 6.5%, maintaining policy stance despite accommodation withdrawal. Monetary Policy Committee’s recommendations on repo rate, policy outlook, inflation, and GDP estimates will be announced.
India’s growth momentum is projected to stay strong, hence there is no need for the MPC to adjust policy settings at the next policy meeting. A policy shift to “neutral” is expected in June, followed by a short rate decrease cycle in FY25. To correspond with growth-inflation dynamics and promote long-term growth, the RBI is projected to retain policy rates at their current levels. This will attract more investment, increase liquidity, and boost investor confidence.
The Reserve Bank of India (RBI) is anticipated to keep key policy rates unchanged for the seventh consecutive meeting of its Monetary Policy Committee, which is chaired by Governor Shaktikanta Das. The current repo rate is 6.5%, and the other rates are 6.25%, 6.75%, 6.75%, 6.75%, and 3.35%. The central bank will announce its repo rate decision at 10 a.m.
