RBI MPC Meeting Oct 2024: The Reserve Bank of India’s 51st monetary policy meeting led by Governor Shaktikanta Das kept rates unchanged. Governor Das said flexible inflation targeting framework has helped bring about price stability globally . The RBI has changed its stance to Neutral and the focus remains unambiguously on INFLATION.
The MPC changed its stance in sync with the Geopolitical conditions and the global growth challenges. Keeping in view the prevailing inflation and growth condition, the RBI remains unambiguously focused on inflation and the alignment to the MPC targets. Earlier this month, the Centre had appointed three new members to the RBI’s monetary policy panel.
Rahul Bhuskute, CIO, Bharti AXA Life Insurance, said, “The decision of RBI to keep policy repo rate unchanged while changing stance to neutral was a surprise to some of the market participants, and as such the bond yields are lower by around 5 bps post the announcement. But in our understanding, this was the most logical step, with domestic growth conditions also slowing down a bit and inflation being well under control. However, given the geopolitical uncertainties, we believe RBI would want to be data dependent going forward and hence the ‘neutral’ stance. We also see a good chance that both RBI’s growth projection of 7.2% and CPI projection of 4.5% will undershoot in this financial year and hence rate cuts are likely to come by starting December. Also, another positive development for the Indian bond market which materialized today was the FTSE global EM index inclusion with estimates of $4-5bn inflows starting Sep-2025.”
Zarin Daruwala, CEO, India and South Asia, Standard Chartered Bank, said, “The status quo on the repo rate is in line with expectations and the decision is backed by solid economic growth projections (FY25 projected at 7.2%). The change in monetary stance to neutral, stemmed from the MPC’s confidence in reining inflation within its target range. This should also bring cheer to the markets as it is likely to serve as a precursor to rate cuts.”
“RBI maintained the repo rate at the same levels and changed the stance to neutral, which was largely in line with consensus. The balance between growth and inflation is well poised and was the cue for stance change. RBI maintained the GDP growth at 7.2% and reiterated the focus to tame inflation, largely Food inflation.
Few measures to further ease impact on customers was announced re: foreclosure charges and increase in per transaction limit for UPI / UPI Lite wallet is a welcome move.
Barring any major upheaval in geo-politics and other external factors, we may see the first action on repo rate in Dec MPC meeting. Near term data points will form the basis for rate cut.”
Rajani Sinha, Chief Economist, CareEdge Ratings, said, “With the change in stance, the MPC has given itself the flexibility to cut rates going forward, depending on how the domestic and global conditions pan out for CPI inflation. While the RBI governor indicated the comfort provided by surplus monsoon and healthy Kharif harvest, he remained cautious of certain inflationary risks. Any adverse weather conditions, escalation of geo-political conflicts and the recent sharp increase in commodity prices needs to be monitored for future inflation trajectory.
We feel that there are chances of a shallow rate cut of 25 bps in the December policy, followed by another 25 bps in the March policy, provided food inflation moderates. While the Central Bank remains optimistic on growth, some moderation in recent high frequency economic indicators like core sector, PMI Manufacturing, GST collections, passenger car sales also give reason for the RBI to look at rate cuts going forward. Expectations of further rate cuts by major global Central Banks including the US Federal Reserve are also supportive of a rate cut by RBI.”
Madan Sabnavis, Chief Economist, Bank of Baroda, said, “The policy did surprise with a change in stance being unanimously passed. This does indicate that a rate cut will be in the offing in future provided the data turns out to be acceptable. Interestingly the RBI has projected inflation at 4.8% for Q3 which is the highest for the 4 quarters this year. This gives a sense that the earliest that we can see a rate cut will be in February given the three major inflation risks highlighted by the Governor: weather, geo-politics and global commodity prices. The fact that growth is on a stable path provides comfort that there is no urgent need to lower the rates at this point of time.”
Ajay Kumar Srivastava, Managing Director and CEO, Indian Overseas Bank, said, “The RBI’s decision keeping the repo rate unchanged at 6.5% is a balanced approach towards fostering growth while managing inflationary pressures. The GDP growth estimate at 7.2% for FY25, is a positive sign and correctly presents the resilience of our economy. We appreciate RBI’s proactive measures to address emerging risks in the unsecured loan segments, ensuring that banks maintain robust underwriting standards. Increase in UPI transaction limits is also a positive move and will make the digital transaction process easier to support customers and contribute to the nation's economic progress.”
Mandar Pitale, Head Treasury, SBM Bank India Ltd, said, “The Monetary Policy Committee (MPC) has changed the stance to neutral deriving comfort from well poised Growth Inflation equilibrium. There is a hawkish undertone to policy verdict in terms of persistent focus on tight vigilance on the near-term trajectory of the inflation to safeguard against systemic risks to inflation outlook. The sustained momentum in domestic growth, with private consumption and investment growing in tandem are instrumental in providing space to MPC to focus on inflation, ensuring its durable descent to the 4 per cent target amidst expectation of near-term spikes. While the growing divergence in inflation-growth dynamics across countries will result in varying monetary policy responses going ahead, MPC is expected to remain unambiguously focused on a durable alignment of inflation with the target. The decision to change the stance to neutral will impart enough flexibility to MPC to act on policy rates in near future if inflation moderates on durable basis on expected lines.”
George Alexander Muthoot, MD, Muthoot Finance, said, “We commend the RBI’s prudent decision to maintain policy rates at 6.5% while adopting a neutral stance, providing essential flexibility to address inflationary pressures without hampering growth. This balanced approach allows the financial sector to respond effectively to evolving economic conditions. Despite global challenges, the Indian economy has demonstrated remarkable resilience, and it’s encouraging to see a revival in investment activities. Additionally, rural demand is on the rise, driven by favorable agricultural activities, which fuels our optimism for sustained growth. As we approach the festive and wedding season, we anticipate further uptick in both urban and rural demand, creating a positive environment for gold loans.”
Vivek Iyer, Partner, Grant Thornton Bharat, said, “The RBI Governor continues to direct the Financial Services ecosystem to take a compliance first approach and keep a focus on governance, to ensure sustained financial stability. A strong focus on asset quality, balanced returns and customer focus seemed to be the three key themes driving the governor's guidance to the regulated entities, more specifically the NBFCs.”
Further, Vivek Iyer said that the Reserve Bank Climate Risk Information System is a major initiative taken by the RBI from a perspective of creating a repository of information for climate specific risks which will go a long way in creating models to effectively model client risk and build it into the credit decision frameworks of regulated entities.
“RTGS and NEFT have taken a leaf out of the UPI Book and offered a facility for remitters to verify beneficiary details prior to effecting transfer of funds. This will help bring down any possibilities of erroneous transfers for high value amounts and also improve customer service on account of reduction in customer complaints stemming out of erroneous payments,” he added.
Prashant Pimple, CIO- Fixed Income, Baroda BNP Paribas Mutual Fund, said, “Overall, the policy was in line with our expectations of a stance change and the language on inflation remained cautious. On growth, no change in the projections reinstates RBI’s expectations of robust economic activity in India and gives RBI the space to follow a pivot that aligns with its inflation target. The stance change bodes well for our view on liquidity conditions as it provides greater flexibility to act based on evolving conditions and thus also supports our view on the short-term rates. Going forward, we expect RBI MPC policy to follow the inflation trajectory and any space for a domestic pivot is expected in Q4 FY25, where we expect inflation to be closer to RBI’s 4% target driven by winter food crop arrival. Having said that, current geopolitical conditions remain a risk to our inflation and growth projections.”
Anuj Puri, Chairman, ANAROCK Group, said, “With the fundamentals of the Indian economy remaining strong despite global headwinds, geopolitical tensions and inflation well within control, the RBI has once again decided to keep the repo rates unchanged at 6.5% - thus helping the housing market to maintain momentum during the festive season. While a repo rate cut would have been preferable, it is clear that the RBI is on a tightrope walk and must keep various macro-economic factors in mind.
From the point of view of homebuyers, the relatively affordable home loan interest rate regime will continue at a critical time for the Indian housing market - the festive season - amid rising housing prices and tapered sales.”
Vimal Nadar, Head of Research, Colliers India, said, “While RBI has kept the benchmark lending rates unchanged at 6.5%, a change in stance from “withdrawal of accommodation” to “neutral” indicates its clear direction for a possible reduction in interest rates in the foreseeable future. This ongoing stability in repo rate should provide a significant thrust to residential real estate during these festive months as home loan interest rates are likely to remain steady.
Typically, Q4, marked by higher inclination of homebuyers to wrap-up property purchases during the auspicious period combined with instantaneous liquidity benefit aided by developers offering attractive discounts, has historically provided the final push to housing sales across the major markets in the country. Additionally, steady borrowing costs and recent extension of Input Tax Credit (ITC) by the Supreme Court can potentially benefit property developers engaged in construction of commercial office buildings.”
Anshuman Magazine, Chairman & CEO - India, South-East Asia, Middle East & Africa, CBRE, said, “The RBI's decision to hold the repo rate steady reflects a balanced approach between achieving economic growth and managing inflation levels. As we approach the festive season, the decision is likely to support the sector's ongoing momentum. The strong performance in the first half of 2024 across most real estate segments, coupled with a seasonal peak in activity, indicates that the real estate sector is well-positioned for continued growth during this period.”
“Monetary policy stance change to neutral is a welcome move as it may alleviate some stress in the deposit space. Keeping the repo unchanged among geopolitical uncertainties is very prudent. Account recognition facilities on money transfer will certainly help curb any misuse of accounts by fraudsters. Overall the stance is appropriate with evolving local and global conditions.”
Suman Chowdhury, Chief Economist and Executive Director, Acuité Ratings & Research, said, “RBI MPC has expectedly retained the benchmark interest rates but has decided to revise the monetary policy stance to “neutral” albeit with an unambiguous focus on inflation while supporting growth. While the MPC has not provided any clear guidance on the rate cuts, it is likely that it will go for a rate cut in Dec'24 or Feb'25, provided the inflationary environment is stable and the headline inflation is consistently within 4.5% in the next few months.”
Amar Ambani, Executive Director, Yes Securities, said, “Along expected lines, RBI kept interest rates unchanged and it shifted its monetary policy stance to "neutral”, explaining that it aims to ensure sustainable liquidity conditions to support growth. This change opens the door for possible interest rate cut in December or February, assuming no inflationary shocks from exogenous factors like Oil. Despite no significant shifts in growth or inflation forecasts, the policy is rightly being aligned with global central banks, rather than focusing solely on food inflation. The RBI's confidence appears to stem from expectations that food inflation will ease later this fiscal year, while core inflation remains under control due to the effects of earlier monetary measures.” He further added any cuts over the next year are expected to be modest at around 50 basis points, as the RBI has informally indicated a preferred real interest rate range of 1.5-1.9%.
Aditi Nayar, Chief Economist and Head of Research and Outreach, ICRA Ltd, said, “Today's MPC review prudently prioritised flexibility, by changing the stance to neutral, in line with our expectations. This has opened the door for a potential rate cut in December 2024, if the lurking risks to inflation, both domestic and global, do not materialise. In our view, the Indian rate cut cycle will be fairly shallow, restricted to 50 bps over two policy reviews.”
Rajeev Radhakrishnan, CIO - Fixed Income, SBI Mutual Fund, said, “The evolving domestic growth inflation outlook clearly was apt for a change in the monetary policy stance to neutral. While remaining cognizant of emerging risks on the inflation outlook, the neutral stance provides more flexibility to address evolving macro dynamics. From a near term perspective, the policy focus would likely remain attuned to address the skewness in system liquidity and any potential financial stability risks.”
Sandeep Chhillar, Founder & Chairman, Landmark Group, said, “Amidst the positive market sentiments, keeping the repo rate unchanged at 6.5 percent for the tenth time in a row gives a further boost to the realty market. The housing sector is witnessing an all-time high demand and with the ongoing festive period, the realty sector anticipates new growth numbers to be registered for upcoming housing sales. The consistent loan rates will increase the number of potential homebuyers, enabling the sector to grow consistently.”
Dharmakirti Joshi, Chief Economist, CRISIL, said that the RBI MPC’s decision to change stane to ‘neutral’ signals circumspection, while also underscoring the likelihood of a rate cut in December.
“The outsized US Federal Reserve rate cut of 50 basis points in September marked a complete and decisive turn in monetary policy among major central banks. Yet, for emerging market peers, domestic inflation concerns are at the front and centre. We anticipate a 25-basis-point reduction in the repo rate during the MPC’s policy review meeting in December, in response to the expectation that food inflation will decline. We also expect GDP growth to moderate to 6.8% this fiscal compared with 7.2% forecasted by RBI for this year,” he said.
Further, he added, “Globally, risks and uncertainties persist, with escalating tensions in the Middle East, weather uncertainties and outcome of US elections in focus. Reason why the RBI took a cautious approach and kept its powder dry.”
Abhishek Bisen, Head Fixed Income, Kotak Mahindra AMC, said, “Given that globally Central Banks are cutting rates with guidance for more cuts and India Real policy rates at ~ 200 bps, RBI MPC decided unanimously to change the monetary policy stance to “neutral” from “withdrawal of accommodation”. Inflation and GDP forecast for FY2025 has been kept unchanged at 4.5% and 7.2% respectively. With RBI changing stance to neutral, we expect RBI to cut rate by 50 bps over the course of next 1 year. RBI policy along with Indian Bonds being included in FTSE Emerging Markets Government Bond index, Indian 10 year G-Ssec has rallied and trading at around 6.75% levels post the policy announcement.”
Nish Bhatt, Founder & CEO, Millwood Kane International, said, “The RBI MPC's decision to keep rates unchanged was on expected lines, the change in policy stance from 'Withdrawal of Accommodative measures' to 'Neutral' is a big positive. While it may not mean a direct rate cut from the next policy, it gives the central bank the flexibility to act according to evolving economic development and data. Another positive is the surplus system liquidity and the Governor's assurance to be flexible and nimble in liquidity management, which has led to a cool-off in bond yields. Overall, today's policy has laid the groundwork for the rate-easing cycle by the RBI. Escalation of geopolitical tensions and a spike in crude prices remain key risks to growth.”
Amit Kumar Malhotra, Head of Sales & Marketing, Ambience Group, said, "The RBI’s decision to keep the key rates unchanged reflects a balanced approach to the current economic landscape. The move to stabilize the rates, particularly the reverse repo at 3.35% and the inflation projection at 4.5%, provides a favorable environment for the housing sector. The controlled inflation outlook, despite the potential upward risks from rising metal prices, will help maintain home loan affordability, which is crucial for both homebuyers and developers. We remain optimistic that this consistency in monetary policy will support steady demand in the residential real estate market, further encouraging the overall growth of the sector."
Shishir Baijal, Chairman and Managing Director, Knight Frank India, said, “The country’s economic growth trajectory remains robust, and with rising inflation risks, the central bank has decided to maintain the policy repo rate while adjusting its policy stance. We welcome the shift to a neutral stance, as it opens the door for potential interest rate cuts in the near future. The real estate sector, particularly the housing market, has experienced strong growth over the past few years. This change in policy stance, along with the prospect of rate cuts, will provide crucial support to the low- and mid-value housing segments, which have seen reduced participation over the last 24 months. Homebuying sentiment remains strong, and with a healthy business environment, we anticipate that the trajectory of monetary policy in the coming quarters will further boost the sector’s growth momentum.”
“RBI change of stance lays ground for future rate cuts. Their caution on the NBFC sector is proactive to keep the financial sector healthy. The RBI will be data dependent but looking to ease at the opportune time.”
Dr Manoranjan Sharma, Chief Economist at Infomerics Ratings, said, “In the overarching macroeconomic setting of heightened geopolitical tensions, core inflation inching upwards, oil price volatility, and high food inflation, we had correctly anticipated a change in the RBI’s policy stance from “withdrawal of accommodation” to “neutral” at its MPC meeting on October 9, 2024. However, as rightly expected by us, there was no rate action and the benchmark interest rates did not undergo any change. A rate cut of 25 bps seems likely in December 2024.
Dhruv Agarwala, Group CEO, Housing.com, PropTiger.com, said, “The RBI's decision to hold the repo rate unchanged at 6.5% for the 10th time in a row is on expected lines as the apex bank tries to maintain a balance between inflation and growth. However, the banking regulator's changing of policy stance from ‘withdrawal of accommodation’ to 'neutral' signals the RBI could initiate rate cuts in the upcoming policy meets. This comes as good news for prospective buyers, planning to invest in property in the near term. We believe this approach will not only sustain momentum in the housing sector but also contribute significantly to broader economic growth in the long term.”
Shreya Sodhani, Regional Economist, Barclays, said, “The MPC kept the repo rate unchanged in a 5-1 vote, but unanimously changed the stance to neutral. We think more optimism on inflation despite unchanged forecasts, and all six members voting for neutral suggesting the need for flexibility clearly opens the door to a December cut. We now expect 75bp of cuts through April.”
Siddharth Chaudhary, Senior Fund Manager – Fixed Income, Bajaj Finserv AMC, said, “The change in stance to “neutral” from “withdrawal of accommodation” is acceptance of the fact that barring the spike in the next couple of months due to base effect, the inflation is expected to be subdued in coming quarters and that the high-frequency growth indicators are slowing. Even though the growth forecast has not been revised downwards this change has created space for RBI to cut rates in upcoming policies while maintaining the optionality as geopolitical risk remains elevated.
Also, note that surplus rains in the South-West monsoon season point to a good agricultural output ahead. It should pull down food inflation, the most volatile part, significantly after a jump in inflation in the next couple of months due to a low base last year.
The Fed’s 50-bps cut has widened the rate differential with India and two more cuts expected by the Fed in this year will create more headroom. This should ease some concerns about lower rates encouraging capital outflows. Overall, the reasons are stacking up for rate cuts.”
Describing the RBI monetary policy review as “realistic and pragmatic”, ASSOCHAM Secretary General Deepak Sood said that the change in stance to 'neutral' from withdrawal of accommodation has given a signal about the interest rates reversing downwards in the next few quarters, even as the MPC kept the policy repo rates unchanged at 6.5 per cent, for now. He said while the domestic economic landscape looks promising in the wake of inflation moderating below four per cent and consumer demand set to further pick up in the ongoing festive season, geo-political events need to be monitored, as rightly pointed out by RBI in the monetary policy statement.
“ASSOCHAM agrees with an optimistic assessment of the central bank with regard to projected overall GDP growth of 7.2 per cent for the fiscal 2024-25, on the back of brighter prospects in agriculture and the consequent pick up in rural demand. Signs of improving rural demand are already visible in some of the high frequency data like tractor and two-wheeler sales and FMCG sector,” he said.