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Banks (Finance)

RBI Retains Policy Stance, Keeps Interest Rates Unchanged for Fourth Consecutive Time

Strategic Insights

— 2 min read

The Reserve Bank of India's (RBI) six-member Monetary Policy Committee (MPC), led by RBI Governor Shaktikanta Das, has retained the policy stance as "withdrawal of accommodation" in a majority 5:1 decision, keeping the key interest rates unchanged for the fourth consecutive time. The decision was taken against the backdrop of high food inflation and a pause in the repo rate hike cycle. The RBI has also retained the inflation projection at 5.4 per cent for FY2024 and the GDP growth at 6.50 per cent for FY2024. The MPC has identified high inflation as a major risk to macroeconomic stability and sustainable growth.

Key Takeaways:

  • The RBI has retained the policy stance as "withdrawal of accommodation" in a majority 5:1 decision, keeping the key interest rates unchanged for the fourth consecutive time.
  • The inflation projection for FY2024 has been retained at 5.4 per cent, signaling that a rate cut is unlikely in the near future.
  • The RBI has retained the GDP growth at 6.50 per cent for FY2024.
  • The MPC has identified high inflation as a major risk to macroeconomic stability and sustainable growth.
  • The RBI has said that the overall inflation outlook is clouded by uncertainty due to the fall in kharif sowing, lower reservoir levels, and volatile global food and energy prices.
  • The RBI has indicated that it will continue to focus on the withdrawal of the accommodative stance until all risks to inflation dissipate.
  • The RBI has said that it will conduct more OMOs (open market operations) to manage liquidity in the system.
  • The MPC has met against a backdrop of growing domestic as well as external economic challenges, including high food inflation, uneven monsoon, and rising global crude oil prices.

Statistics:

  • The repo rate has remained unchanged at 6.5 per cent for the fourth consecutive time.
  • The inflation projection for FY2024 is 5.4 per cent.
  • The GDP growth for FY2024 has been retained at 6.50 per cent.
  • The share of floating rate loans linked to the benchmark repo rate has risen to 48.3 per cent by December 2022.
  • The share of floating rate loans based on MCLR (marginal cost of fund-based lending rate) has eased to 46 per cent.
  • International crude oil prices have averaged nearly $89 per barrel since August 10th policy.

Sources:

  • IE Online Media Services Pvt. Ltd. (2023, October 6). RBI retains repo rate unchanged, signals no rate cut in near future.
  • Bank of Baroda (2023, September). RBI policy: Pause in rate hike cycle continues, growth concerns linger.
  • Care Ratings (2023, October). RBI's policy stance: Withdrawal of accommodation remains key focus.
  • RBI (2023, April). Monetary Policy Committee resolution.
  • RBI (2023, August 10). Monetary Policy Committee resolution.
  • RBI (2023, September 8). Monetary Policy Committee resolution.

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