RBI Monetary Policy Committee’s Status Quo on Repo Rates and Policy Stance

Context:

• The RBI Monetary Policy Committee has kept the key policy repo rate unchanged at 6.5%. RBI emphasizes on addressing inflation risks until they dissipate completely.

RBI Monetary Policy Committee’s Key Outcomes

• Status Quo on Rates and Policy Stance: In the latest RBI monetary policy announcement, RBI maintained the policy repo rate at 6.5% and retained the policy stance as the “withdrawal of accommodation.”
• Inflation Target and Projection: The fight against inflation remains a priority within the RBI monetary policy, targeting an inflation rate of 4% (rather than a range of 2-6%). The CPI inflation projection for FY24 is 5.4%, with specific projections for different quarters.
• GDP Growth Forecast Unchanged: RBI maintained the GDP growth forecast for FY24 at 6.5%, with detailed projections for each quarter, signaling stability in growth expectations.
• OMO Sales of Government Securities: RBI may consider Open Market Operation (OMO) sales of government securities to manage liquidity, aligning with the monetary policy stance.
  • The timing and quantum of such operations will be based on evolving liquidity conditions.
• Introduction of Card-on-File Tokenisation (CoFT): RBI proposed the introduction of card-on-file tokenization (CoFT) creation facilities directly at the issuer bank level to enhance convenience for cardholders when using e-commerce applications.

 Implication of RBI Status Quo

• Impact on Borrowers and Depositors: Pause in Repo rate hike ensures stability in external benchmark lending rates (EBLR) and Banks will not raise their lending rates, which, in turn, will mean that the equated monthly installments (EMIs) on home, vehicle and personal loans will remain steady.

News Source: The Indian Express

DOWNLOAD PDF