RBI Keeps Interest Rates Unchanged; Policy Committee More Divided

The Reserve Bank of India maintained its policy rate unchanged at 6.5% for the eighth consecutive time, signalling a continued focus on controlling inflation. RBI Governor Shaktikanta Das announced the decision, emphasising the Monetary Policy Committee's commitment to monitoring elevated food inflation.

Mumbai: The Reserve Bank of India (RBI) left its key interest rates unchanged on Friday as expected, keeping the focus on inflation amid robust economic growth that is likely to provide the new Modi government headroom for manoeuvring reforms.

The Monetary Policy Committee, consisting of three RBI and an equal number of external members, kept the repo rate unchanged at 6.50 per cent for an eighth straight policy meeting and stuck to its relatively hawkish stance of "withdrawal of accommodation", Governor Shaktikanta Das said in his statement.

However, there were signs of a more divided policy committee, with one additional member voting for a softening in stance as well as policy direction. Two external members, Ashima Goyal and Jayanth Varma, voted for a cut, compared to one in the previous meeting.

The decision comes just days ahead of Narendra Modi assuming the office of the Prime Minister of India for the third straight time but with a smaller-than-expected election victory that forced his party BJP to share power in a coalition government. The slim majority, according to global rating agencies, may delay more far-reaching elements of economic and fiscal reforms like land and labour, and impede progress on fiscal consolidation.

Das said while the MPC took note of the disinflation achieved so far without hurting growth, it remains vigilant to any upside risks to inflation, particularly from food inflation, which could possibly derail the path of disinflation.

"Monetary policy must continue to remain disinflationary and be resolute in its commitment to aligning inflation to the target of 4.0 per cent on a durable basis," he said.

RBI Raises GDP Growth Projection to 7.2 Pc for FY25

The Reserve Bank of India on Friday revised upwards the GDP growth projection for the current fiscal to 7.2 per cent from 7 per cent on rising private consumption and revival of demand in rural areas. RBI Governor said, "Real GDP growth for 2024-25 is projected at 7.2 per cent with Q1 at 7.3 per cent, Q2 at 7.2 per cent, Q3 at 7.3 per cent, and Q4 at 7.2 per cent. The risks are evenly balanced."

When the projected GDP growth of 7.2 per cent for 2024-25 materialises, it will be the fourth consecutive year with growth at or above 7 per cent.

RBI Permits Automatic Replenishment of UPI Lite Wallet

The Reserve Bank proposed a facility to allow customers to automatically replenish their UPI Lite wallets to promote small-value digital payments. Currently, the UPI Lite has a daily limit of Rs 2,000, while the upper limit for a single payment is Rs 500.

UPI Lite is a simplified version of the Unified Payments Interface (UPI). It acts as an on-device wallet for small-value transactions. Presently, the UPI Lite app can only hold a maximum of Rs 2000 at a time.

"To encourage wider adoption of UPI Lite, it is now proposed to bring it under the e-mandate framework by introducing a facility for customers to automatically replenish their UPI Lite wallets if the balance goes below the threshold limit set by them," Das said.

Builders Want Reduction in Repo Rate in RBI's Next Monetary Policy to Boost Housing Sales

The RBI should consider reducing the repo rate in the next monetary policy to bring down the interest rate on home loans and boost housing demand, according to real estate developers. The Reserve Bank of India (RBI) on Friday kept repo rate unchanged.

Commenting on the decision, realtors apex body CREDAI National President Boman Irani said the country achieved high economic growth in the last fiscal on contributions from all sectors including real estate.

"Coupled with other healthy macro-economic indicators and CPI (Consumer Price Index) at an 11-month low at 4.83 per cent recorded in last April, RBI possesses a strong opportunity to provide a sustained, formidable platform to further elevate this holistic economic development across industries," Irani said.

RBI Retains Inflation Projection for FY25 at 4.5 Pc

The Reserve Bank of India on Friday retained its projection for retail inflation at 4.5 per cent for the current fiscal assuming a normal monsoon, while emphasising that uncertainties related to food price outlook warrant a close monitoring.

Consumer Price Index (CPI)-based retail inflation has been projected at 4.5 per cent with quarter-wise projections at 4.9 per cent in Q1 (April-June), 3.8 per cent in Q2, 4.6 per cent in Q3, and 4.5 per cent in Q4. The Reserve Bank, which has been mandated to ensure inflation remains at 4 per cent (with margin of 2 per cent on either side), mainly factors in CPI while arriving at its monetary policy.