The Reserve Bank of India’s Monetary Policy Committee will kick start its three-day meeting on Wednesday (June 5), in the immediate backdrop of Lok Sabha election results. The six-member committee entrusted with the task of setting India’s benchmark interest rate, the repo rate, will commence the meeting on June 5 and it will end on June 7. This rate directly impacts borrowing costs for banks and indirectly influences loan interest rates for businesses and individuals. RBI Governor Shaktikanta Das will announce the committee’s decision on interest rates at 10 am on June 7.
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.
What to expect?
The review by the six-member MPC led by Shaktikanta Das will provide a foreword of the course that the central bank will adopt for the ongoing fiscal year as it seeks to strike a fine balance between sustaining growth and inflation under the 4 per cent target. According to the majority of economists, the central bank is expected to keep its repo rate unchanged at 6.50 per cent after its deliberations, continuing its stance of ‘withdrawal of accommodation’.
Shreya Sodhani, Regional Economist, Barclays, said, “With the still-robust growth outlook creating no urgency to cut rates and inflation still above target, driven mainly by food, we expect the MPC to vote 5-1 to keep the policy settings unchanged. We do not expect the majority of the MPC to see a reason to cut before December.”
Experts also stated that rate cut decisions by the RBI will also be based on US Fed’s rate decisions. Vikrant Mehta, Head – Fixed Income, ITI Mutual Fund, said, “The Monetary Policy Committee (MPC) will meet over June 5-7, 2024, to review the policy repo rate as well as communicate the policy stance. Since the MPC last meeting, geopolitical volatility rose in the first half of April, and though it appears to have subsided post that, underlying tensions continue to simmer. Furthermore, global markets now anticipate the Fed to be on a “longer than anticipated hold” as compared to March. Thus, in the current environment, though India’s headline inflation is expected to moderate further, we feel that the RBI is unlikely to make changes to both – policy rate as well as the stance of the policy.”
The RBI had last increased the repo rate by 25 basis points (bps) on February 8, 2023, to 6.5 per cent. One basis point is one-hundredth of a percentage point. The RBI MPC had announced the repo rate at 6.25 per cent during its December 2022 meeting.
Meet the six-member monetary policy committee
The panel headed by RBI Governor Shaktikanta Das has three external members. It can be noted that Shaktikanta Das’ term as the RBI Governor is set to end in December this year. Other members of MPC are Shashanka Bhide, Ashima Goyal, Jayanth R Varma, Rajiv Ranjan, and Michael Debabrata Patra. Every member of the MPC has one vote, and in the event of an equality of votes, the Governor has a second or casting vote.
Here are dates for RBI’s MPC meetings this financial year
April 3-5, 2024
June 5-7, 2024
August 6-8, 2024
October 7-9, 2024
December 4-6, 2024
February 5-7, 2025
A look at the timeline of MPC meetings starting the previous fiscal year till date and announcements by the central bank on the repo rate:
6th April 2023: During its April 2023 meeting, the RBI MPC decided not to hike the country’s repo rate, keeping the key lending rate at 6.5 per cent unanimously. The RBI MPC, with a 5:1 majority, maintained the withdrawal of accommodation stance, RBI Governor Shaktikanta Das had said. The RBI had also stated the real GDP growth projection for FY24 was at 6.5 per cent. However, fears of sustained core inflation remain persistent on weather-related vagaries, OPEC+’s surprise announcement and rising commodity prices.
8th June 2023: The RBI governor, during its June 2023 meeting, had said that the MPC has decided to keep the key policy repo rate unchanged at 6.5 percent. “MPC also decided by a majority of five out of 6 members to remain focused on withdrawal of accommodation to ensure inflation aligns with the target while supporting growth,” RBI Governor Shaktikanta Das had said. RBI recognises that the pace of global economic activity is expected to decelerate on the back of elevated inflation, geo-political tension and tight financial conditions, he had stated. He also said that the standing deposit facility rate remained at 6.25 per cent, and marginal standing facility rate and bank rate remained unchanged at 6.75 per cent.
10th August 2023: After its three days meeting in August, the RBI governor said that the MPC decided to keep the key policy repo rate unchanged at 6.5 per cent, maintaining status quo for the third time in a row. The MPC voted in 5:1 majority to maintain the ‘withdrawal of accommodation’ stance to ensure that inflation progressively aligns with the target, while supporting growth, Shaktikanta Das had said. “Consequently, the standing deposit facility (SDF) rate remains at 6.25 per cent and the marginal standing facility (MSF) rate and the Bank Rate at 6.75 per cent,” he had added. He had further added that the global growth will remain low by historical standards for the next few years and if warranted, RBI is prepared to act.
6th October 2023: After its fourth bi-monthly meeting in October, RBI MPC had announced that the central bank decided to keep the repo rate unchanged at 6.50 per cent and stance of ‘withdrawal of accommodation. The RBI governor had said, “After a detailed assessment of the evolving macroeconomic and financial developments and the outlook, RBI’s Monetary Policy Committee decided unanimously to keep the policy repo rate unchanged at 6.5 per cent.” The RBI MPC had also mained FY24 GDP target at 6.5 per cent. “GDP to soften in subsequent quarters in FY24 with Q4 growth seen around 5.7 per cent,” he had said.
8th December 2023: During its December meeting, the RBI MPC had announced its decision to keep the repo rate unchanged at 6.50 per cent. This was the fifth meeting wherein the MPC decided to maintain the status quo on the repo rate. “The Reserve Bank of India’s Monetary Policy Committee after a detailed assessment of the evolving macroeconomic developments, has decided unanimously to keep the repo rate unchanged at 6.5 per cent,” RBI Governor Shaktikanta Das had said, amid India’s better-than-expected economic growth. The RBI governor had said that FY24 real GDP growth was projected at 7 per cent. Real GDP growth for the next year was projected at 6.7 per cent in Q1, 6.5 in Q2 and 6.4 in Q3.
8th February 2024: During its February 2024 meeting, the RBI MPC had decided to keep the policy repo rate under the liquidity adjustment facility (LAF) unchanged at 6.50 per cent. The MPC had also decided to remain focused on withdrawal of accommodation to ensure that inflation progressively aligns to the target, while supporting growth. “These decisions are in consonance with the objective of achieving the medium- term target for consumer price index (CPI) inflation of 4 per cent within a band of +/- 2 per cent, while supporting growth,” Das had announced after the end of the three days meeting.
5th April 2024: During the April 2024 meeting, the RBI MPC unanimously decided to keep the key interest rates unchanged at 6.50 per cent. The RBI’s MPC voted by a 5:1 majority to keep key rates unchanged at 6.50 per cent. The policy stance was also maintained at ‘withdrawal of accommodation’. The RBI also retained a GDP growth forecast of 7 per cent for 2024-25 financial year, with June quarter growth at 7 per cent, and September quarter at 6.9 per cent. In the third and fourth quarter the growth is expected to be 7 per cent each.