RBI keeps repo rate unchanged at 6.5%
What's the story
The Reserve Bank of India's (RBI) Monetary Policy Committee (MPC) made a unanimous decision to keep the key lending rate, the repo rate, unchanged at 6.5%. The rate-setting panel also kept the policy stance unchanged, emphasizing a shift toward withdrawal of accommodation. In the last four bi-monthly monetary policies, the RBI maintained the status quo on the repo rate.
Details
SDF and MSF rates remain unchanged too
"After a detailed assessment of the evolving macroeconomic financial developments and the outlook, the Monetary Policy Committee decided unanimously to keep the policy repo rate unchanged at 6.5%," RBI Governor Shaktikanta Das said. "Consequently, the Standing Deposit Facility (SDF) rate remains at 6.25% and the Marginal Standing Facility (MSF) and the bank rate remains at 6.5%," Das added.
Details
GDP growth projections revised to 7% from 6.5% earlier
The GDP growth projection for the current fiscal year (FY24) has been raised to 7%, with projections of 6.5% and 6% for the third and fourth quarters, respectively. The RBI had earlier projected a growth rate of 6.5%. In the first three quarters of FY25, the GDP is expected to grow by 6.7%, 6.5%, and 6.4%, respectively.
Details
Inflation forecast at 5.4%
The RBI decided to stick with its inflation forecast of 5.4% for this fiscal year, despite worries about food price hikes, fluctuations in crude oil prices, and the potential for domestic economic growth to cause inflation to rise. The RBI also maintained its policy stance of "withdrawal of accommodation" to ensure inflation progressively aligns with the committee's target while remaining supportive of economic growth.
Insights
What is repo rate, SDF, and MSF?
The repo rate is the rate of interest at which RBI lends to other banks. With repo rate unchanged, loan interest rates may remain unchanged too. The Standing Deposit Facility is a way for banks to handle extra cash without needing collateral by absorbing it through interest payments. The Marginal Standing Facility lets commercial banks get short-term funds overnight when inter-bank liquidity runs dry.