The Reserve Bank of India (RBI).
Credit: Reuters File Photo
New Delhi: The Reserve Bank of India (RBI) on Wednesday kept key policy interest rates unchanged for the 10th straight time but changed its stance to ‘neutral’, setting the tone for easing in monetary policy in the next meeting, which is scheduled in December.
The newly reconstituted Monetary Policy Committee (MPC) of the central bank decided by a 5:1 majority to keep the repo rate unchanged at 6.5%. New MPC member Nagesh Kumar voted to cut the policy rates by 25 basis points.
The standing deposit facility (SDF) rate has been kept unchanged at 6.25% and the marginal standing facility (MSF) rate and the Bank Rate at 6.75%. These policy rates, which determine liquidity in the Indian banking system and affect lending and borrowing rates by commercial banks and other financial institutions, were last hiked in February 2023.
“The MPC decided unanimously to change the stance to ‘neutral’ and to remain unambiguously focused on a durable alignment of inflation with the target, while supporting growth,” RBI Governor Shaktikanta Das said at the post MPC meeting media briefing.
The RBI also increased the transaction limit of UPI Lite that enables PIN-less offline digital payments, from Rs 500 to Rs 1,000 and wallet limit from Rs 2,000 to Rs 5,000.
Additionally, Das warned non-banking financial companies (NBFCs) against aggressive business growth. Though he acknowledged the impressive growth of NBFCs over the past few years, Das raised concerns about some entities pursuing growth at the cost of proper risk management and sustainable business practices.
“It is important that NBFCs follow sustainable business goals; a ‘compliance first’ culture; a strong risk management framework; a strict adherence to fair practices code; and a sincere approach to customer grievances,” Das said.
“The Reserve Bank is closely monitoring these areas and will not hesitate to take appropriate action, if necessary. Self-correction by the NBFCs would, however, be the desired option,” he added.
The central bank rejigged the quarterly GDP growth estimates, but kept the full-year projection for FY 2024-25 unchanged at 7.2%.
GDP growth for July-September quarter has been revised downward from 7.2% to 7% while for the third quarter it has been raised from 7.3% to 7.4%. For the fourth quarter of the current financial year it has been revised upward from 7.2% to 7.4%.
Das said retail inflation, which remained below the RBI’s median target of 4% in July and August, is likely to rise in the upcoming months.
“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,” said Dharmakirti Joshi, Chief Economist, CRISIL.