RBI Monetary Policy Announcement: The Reserve Bank of India (RBI) Governor Shaktikanta Das on Friday announced the second bi-monthly monetary policy of the financial year 2024-25. The RBI Governor said that the Monetary Policy Committee (MPC) decided to keep the benchmark repo rate unchanged at 6.5 per cent for the eight consecutive time by a 4:2 majority. It also decided to continue with its stance of ‘withdrawal of accommodation’. RBI raised its GDP growth forecast for FY25 to 7.2 per cent from 7 per cent earlier. The central bank retained the FY25 inflation forecast at 4.5 per cent.
This is the second meeting of the RBI MPC after the new financial year FY2025 started from April 1 and the third meeting of 2024 after the February Policy meeting held between February 6-8. The Monetary Policy Committee invariably meets for 3 days before announcing its decision at the end of the 3-day period. The next RBI MPC meeting is scheduled on August 6. The MPC is required to meet at least four times in a year.
Pradeep Aggarwal, Founder & Chairman, Signature Global (India) Ltd, said, “The RBI has maintained steady interest rates for the eighth consecutive time, likely influenced by high food inflation despite the overall Consumer Price Index (CPI) remaining within the target range. Provisional GDP growth for FY24 stands at an impressive 8.2%, up from 7% in FY23, further supporting this decision. Additionally, the combined Index of eight core industries (ICI) recorded a provisional growth of 6.2% in April 2024 compared to April 2023, reflecting increased production in key industries.
Economists predict that if inflation continues to decline, rate cuts of 25-50 basis points could be expected in the second half of the fiscal year. Such a reduction in interest rates could significantly boost the real estate sector, which is already benefiting from strong end-user demand. We anticipate this robust demand trend to remain healthy over the coming years, particularly in cities like Gurugram, which are experiencing substantial infrastructure development.”
Ritesh Jain, Co-Founder of Flexiloans.com
RBI latest monetary policy decisions are set to significantly benefit MSMEs by maintaining the repo rate at 6.5% and projecting a robust GDP growth of 7.2% for FY25. This reflects strong domestic demand and favorable economic conditions, offering MSMEs expanded market opportunities and financial stability. Additionally, the RBI’s push for digital payments includes integration of UPI Lite into the e-mandate framework to facilitate small-value transactions and allow automatic wallet replenishment when balances fall below set thresholds. This will boost digital payments and reduce transaction costs, thereby enhancing operational efficiency and cash flow management for MSMEs.
The RBI’s policy update provides a stable and supportive outlook for MSMEs and NBFCs. By maintaining the repo rate and projecting higher growth, the RBI reinforces its commitment to fostering a balanced and resilient economic environment. This sets a strong foundation for continued economic development and financial stability, crucial for the growth and success of MSMEs and the broader financial sector.
“We welcome the Reserve Bank of India‘s decision to maintain its current policy rates amidst the backdrop of volatile food prices, ongoing geopolitical tensions, and the Federal Reserve’s extended pause on interest rates. Looking ahead, it is crucial for the RBI to continue monitoring the evolving economic landscape, particularly in the aftermath of the Lok Sabha elections and the upcoming Union Budget. The policies and fiscal measures introduced next month will play a significant role in shaping the trajectory of our economy. A balanced and forward-looking approach will be essential to support sustained growth and stability in the real estate sector and the broader economy. We remain optimistic that the RBI, with its vigilant and adaptive stance, will continue to foster an environment conducive to economic resilience and development.”
Nilesh Shah, MD, Kotak Mahindra AMC, said, “The RBI is playing the role of a perfect conductor. Music is flowing through in a melodious tone. Core Inflation is below mid-point of target, inflation trajectory is falling, growth is in the higher range, rupee is stable, liquidity is well balanced albeit with some skewness due to government spending. Market just want the show to go on which the credit policy has delivered. Why repair something which ain’t broken?”
“The status quo from the MPC was on expected lines, with only the voting change on the stance to 4:2 posing a surprise. Despite this, the 10 year G-sec yield remained above 7%, with the actual start to the rate cut cycle appearing distant.”
“In the first MPC meeting after the recently concluded general elections, the RBI has maintained status quo. The repo rate remains at 6.5% and withdrawal of accommodation continues. This decision comes against the backdrop of a concerted effort to contain inflation close to 4% on a durable basis. Furthermore, an upward revision of FY 2025 GDP growth rate projection by 20 bps to 7.2% will fuel business optimism across sectors including real estate.
A stable financing environment will continue to benefit homebuyers and developers in both residential and commercial real estate. As central banks across the world ponder over rate cuts, the timing and pace of such reductions in India will remain a key monitorable and should provide further boost to residential activity in the ongoing fiscal year.”
“The RBI‘s decision to keep the repo rate unchanged is a boon for the Indian real estate sector. This stability ensures that home loan interest rates remain low, making housing more affordable for potential buyers. With unchanged borrowing costs, both developers and homebuyers benefit from increased market confidence and predictability. With the mandate of a stable government now manifest in an unchanged monetary policy, the housing sector’s overall growth momentum will continue.”
“As anticipated, the RBI maintained its key policy rates and liquidity stance unchanged during the June 2024 monetary policy review. The RBI revised its annual GDP growth estimate upward for the current year while keeping the retail inflation forecast steady. Several indications from the governor’s speech suggest that the RBI is unlikely to commence rate cuts soon. The upward revision in growth, the expectation of a non-linear disinflationary process, and a clear signal that the RBI will not mirror the Federal Reserve’s anticipated monetary policy easing, imply that a rate cut in 2024 is improbable.
However, with two of the six monetary policy committee members advocating for easing, and considering the RBI’s expectation of continued falling inflation alongside the current high real interest rates, it appears that the RBI may not maintain the policy rates and liquidity tightening stance for an extended period. Today’s policy is neutral for financial markets in the near term, but the medium-term implications are positive for both the equity and debt markets.”
Anitha Rangan, Economist, Equirus, said, “RBI in its 2nd monetary policy for FY25, maintained policy rate at 6.5% as expected and maintaining withdrawal of accommodation. The key takeaway is a) shift in voting pattern from 5-1 to 4-2 are likely the dissenters b) Upwards revision in growth for FY25 to 7.2% from 7.0% while keeping inflation unchanged at 4.5% for the year. Overall, the key reason for maintaining policy rate is the uncertainty on the outlook of domestic inflation led by the food side. According to RBI, while core inflation is encouraging and at the lowest level in the current series, it is the food inflation that is playing spoilt sport, requiring vigilance. In addition, crude outlook remains uncertain. A reference was also made that external factors are watched for, to see the impact on domestic inflation. Overall, Indian economy is at an inflextion point with inflation on right track but work to be done. The watch is from global side with global last mile inflation remaining arduous and geo-political risks. For Rbi as we have reiterated earlier growth remaining firm, monetary policy has elbow room to focus on price stability. The growth revision only reiterates that RBI is willing to wait and watch – RBI can watch for longer. RBI has the trinity of patience, perseverance and poise to support the economy!”
Anshuman Magazine, Chairman & CEO – India, South-East Asia, Middle East & Africa, CBRE, said, “The RBI‘s decision to retain the repo rate at 6.50% signifies a continuity of cautious monetary policy. This prioritizes the objective of achieving an equilibrium between curbing inflationary pressures and nurturing a robust economic environment. Maintaining the status quo of the repo rate is likely to ensure sustained momentum within the real estate sector, thereby benefiting borrowers. Furthermore, the policy decision is expected to contribute to a broader affirmation of consumer confidence.”
RBI Governor Shaktikanta Das said, “On inflation, we are on the right track, but there is still work to be done. Globally, there are concerns that the last mile of disinflation might be protracted and arduous amidst continuing geopolitical conflicts, supply disruptions and commodity price volatility. In India, with growth holding firm, monetary policy has greater elbow room to pursue price stability to ensure that inflation aligns to the target on a durable basis. In its current setting, monetary policy remains squarely focused on price stability to effectively anchor inflation expectations and provide the required foundation for sustained growth over a period of time.”
RBI Governor Shaktikanta Das said, “Customer protection remains on top of the Reserve Bank’s priorities. In general, we have observed that guidelines on Key Facts Statement (KFS) are followed, but a few REs still charge fees, etc. that are not specified or disclosed in the Key Facts Statement (KFS).”
“The annual financial results for 2023-24 indicate that the banking system remained sound and resilient, backed by improvement in asset quality, enhanced provisioning for bad loans, sustained capital adequacy and rise in profitability. The non-banking financial companies (NBFCs) also displayed strong financials in line with the banking sector. Notably, the GNPAs of scheduled commercial banks (SCBs) and NBFCs are below 3 per cent of total advances as at end of March 2024,” said RBI Governor Shaktikanta Das.
RBI MPC Meet 2024 Live Updates: RBI Governor Shaktikanta Das said, “Looking ahead, the Reserve Bank will continue to be nimble and flexible in its liquidity management through main and fine-tuning operations in both repo and reverse repo. We will deploy an appropriate mix of instruments to modulate both frictional and durable liquidity so as to ensure that money market interest rates evolve in an orderly manner which preserves financial stability. As our actions over the recent period have shown, the Reserve Bank stands committed to maintain stability and orderliness in all segments of financial markets and institutions regulated by it.”
“The Indian rupee (INR) moved in a narrow range with low volatility during 2024- 25 so far (up to June 5), despite trading under pressure amidst foreign portfolio investment (FPI) outflows. The relative stability of the INR bears testimony to India’s sound and resilient economic fundamentals, macroeconomic and financial stability, and improvement in the external outlook,” said Shaktikanta Das.
“There is a view that in matters of monetary policy, the Reserve Bank is guided by the principle of ‘follow the Fed’. I would like to unambiguously state that while we do keep a watch on whether clouds are building up or clearing out in the distant horizon, we play the game according to the local weather and pitch conditions. In other words, while we do consider the impact of monetary policy in advanced economies on Indian markets, our actions are primarily determined by domestic growth-inflation conditions and the outlook,” said RBI Governor Shaktikanta Das.
“CPI headline inflation softened further during March-April, though persisting food inflation pressures offset the gains of disinflation in core and deflation in the fuel groups. Despite some moderation, pulses and vegetables inflation remained firmly in double digits. Vegetable prices are experiencing a summer uptick following a shallow winter season correction. The deflationary trend in fuel was driven primarily by the LPG price cuts in early March. Core inflation softened for the 11th consecutive month since June 2023. Services inflation moderated to a historic low and goods inflation remained contained.”
RBI Guv Shaktikanta Das said, “Global growth is sustaining its momentum in 2024 and is likely to remain resilient, supported by rebound in global trade. Inflation is easing, but the final leg of this disinflation journey may be tough. Central banks remain steadfast and data-dependent in their fight against inflation. Market expectations regarding the timing and pace of interest rate cuts are also changing with incoming data and central bank communication. US dollar and sovereign bond yields remain range bound. While gold prices have surged on safe haven demand, equity markets have gained in both advanced and emerging market economies since the last MPC meeting.”
RBI Governor Shaltikanta Das said, “I shall now briefly set out the rationale for these decisions. The inflation-growth balance is moving favourably. Growth is holding firm. Inflation continues to moderate, mainly driven by the core component which reached its lowest level in the current series in April 2024. The deflation in fuel prices is ongoing. Food inflation, however, remains elevated.”
RBI Governor Shaktikanta Das addressed concerns regarding the interest rates on small value loans, highlighting their perceived high rates. H said that the central bank will take further steps to moderate unsecured loans and advances. He noted that few regulated entities were charging certain fees without proper disclosures.
RBI says “To encourage and widen aopotion of of UPI Lite RBI now proposes to bring it under e-mandate framework by introducing a facility for customers to automatically replenish if the balance goes below the threshold level.”
RBI Governor on Digital Payment: “The Reserve Bank over the years has taken several measures to deepen digital payment while ensuring safety. Growing instances of digital fraud highlight the need for a system-wide approach to prevent and mitigate such fraud. It is therefore proposed to set up Digital Payments Intelligence Platform for network level intelligence and real time data sharing across the digital payments ecosystem. The RBI has constituted a committee for setting up this platform.”
RBI Governor Shaktikanta Das announced a surge in Foreign Portfolio Investor (FPI) flows during FY24, with an inflow totaling $41.6 billion.
Shaktikanta Das noted that vegetable prices are currently on the rise for the summer season. He attributed the deflationary trend in fuel prices mainly to cuts in LPG prices. Furthermore, he highlighted the global trend of increasing food prices, indicating a shift in the broader market dynamics.
A forecast of above-normal southwest monsoon by IMD is expected to boost kharif production and also replenish reservoir levels, said Shaktikanta Das.
“The forecast of above normal monsoon bodes well for the kharif season. Wheat procurement has surpassed last year’s level. The buffer stocks of wheat and rice are well above the norms. These developments could bring respite to food inflation pressures, particularly in cereals and pulses. The outlook on crude oil prices remains uncertain due to geo-political tensions,” he said.
India Meteorological Department (IMD), earlier, retained its outlook of an ‘above normal’ monsoon this year.
RBI Governor Shaktikanta Das said that private consumption is recovering with steady discretionary spending in urban areas. He added that investment activity continues to gain traction.
RBI raised its GDP growth forecast for FY25 to 7.2% from 7%
Q1FY25 GDP growth forecast increased to 7.3% from 7.1%
Q2FY25 GDP growth forecast increased to 7.2% from 6.9%
Q3FY25 GDP growth forecast increased to 7.3% from 7%
Q4FY25 GDP growth forecast increased to 7.2% from 7%